Archives for 2011

Grandparent Scam Strikes Again

Put yourself in the shoes of a caring Grandmother. Let’s say one day you receive a call from your grandson telling you they’ve been in an accident and are being held in jail in the Dominican Republic. They want you to keep their little debacle a secret but they need you to wire money to them ASAP to get them out of jail.

What would you do?

Claudia Beach of Jacksonville, Florida recently faced this exact scenario recently and in a worried, emotional state, sent the money straight away to her needy “grandson”. Her “grandson” first called asking for $3,400 for bail out of the Dominican Republic jail he was stuck in.

“My emotions went wild. I couldn’t think. All I could think was he was in jail in a foreign country”.

Grandparent Scam

She rushed to her nearest Publix and wired the money immediately via Western Union.

Keeping her “grandson”s secret she apparently didn’t discus this matter with the boy’s parents. The very next day she received another call from him. This time he said they were making him pay his medical expenses of $2,400.

To Western Union!

Later that very afternoon the phone rang again. This time sonny-boy was asking for $1,800 to pay for the medical expenses of the lady he hit.

She says that the employees at Western Union questioned her each time if she was sure if this was her grandson. When he called the first time he told her that he didn’t sound like himself since he had been in the accident and had stitches in his lips. In a concerned state, she bought this story.

The money was wired each time to a lawyer by the name of Angel Rosario. Money that Claudia Beach will never see again. A total of $8,300. She has since filed a complaint with the Federal Trade Commission and the local police. Beach has come forward with this story to bring awareness to others that might be at risk for this scam.

To protect yourself:

Do not disclose any information before you have confirmed it really is your grandchild.
If you’re not sure ask the caller for their middle name or the elementary school he or she attended.
Do not respond with a name but instead let the caller explain who he or she is.

What breaks my heart about this scam is that it preys on love. If you are a caring Grandparent be wary if you receive a call like this that tugs on your heart strings. If you receive a distress call from a family member in another country I would recommend first, verifying that they are in fact in another country. Using the bullet pointed suggestions above or maybe calling their cell phone? Or their parents to ask how they are doing and what they are up to? I understand there will be different cases for different family dynamics but before you pay up you need to verify an identity!

Video about Grandparent Scam Strikes Again by @GetOutOfDebtGuy from GetOutOfDebt.org

This guest post was submitted by Steve Rhode who is a consumer debt expert and helps learn about getting out of debt and avoid scams.

How To Deal With Regular Bills When You Have An Irregular Income

By Contributor 5 Comments

When your income doesn't come in 24 equal payments spaced evenly throughout the year it can be hard to make a budget. Unfortunately, this is a fact that a lot of people deal with in their life. There are a lot of industries where the pay is great in the summer time and then tapers off with the chill of winter. Or even vice versa. If you aren't careful with your budget throughout the year you can find yourself in a pinch in the off-season.

I was talking to a friend of mine who is a realtor. She was saying her income is great in the summer but then in the winter she has a hard time making ends meet. People would prefer to move in the summer since the kids are out of school and the weather is nicer, and no one wants to move around the holidays. She wanted to know how much she should have in her emergency fund to cover her winter expenses.

But I actually felt she was looking at it the wrong way. An emergency fund for emergencies and her winter expenses aren't emergencies. She knows these bills are coming, so she should plan for them, outside of her emergency fund.

The first thing she needs to do is figure out what her average monthly income is and make a budget based on that average. Part of her budget should include debt elimination, if she has debt, building of her true emergency fund, and future investments. Along with that she needs to put some money into an emergency fund. A little bit of money, not the full 3-6 months right away. She just needs to protect herself from a normal sized emergency right now.

Let's look at some pictures. (hand drawn by yours truly)

Cyclical Income

Here we have her income. The gray curvy line is her income. The black dashed line is her new budget. Now she has a budget that works for her income. Next she needs to start building what I call, her cushion fund.

cyclical income with cushion

A cushion fund is money that you set aside to fill in the gaps between your income and your budget. So during the summer months she would build her cushion fund, and in the winter months she would draw from it. This smooths out her income so it's not wild parties in the summer and Ramen noodles in the winter. It's just normal life all year-long.

This system allows her to plan for her reduced winter income and also be prepared for a true emergency should one arise. Right now, at the end of summer, she is feeling very stressed knowing her income is going to go down soon. But if she follows this plan, next year will be a different story. She probably still won't like receiving those smaller checks, but at least she will have a plan to put food on the table.

Do you have an irregular income? How do you handle it?

This article was written by Ashley over at Everything Finance. Everything Finance is a site about just that, everything related to finance. You can get information about investing, saving money, shopping, blogging, and making money online. If you like what you see here, make sure to stop by or better yet subscribe to their feed so you don't miss a thing.

Are You Seriously Committed To Saving, Or Still Committed To The Short-Term?

By Contributor 1 Comment

People can't stop talking about the possibilities of a second recession, which may very well be redefined as the continuation of what becomes the broader-defined Great Recession of the decade.

Between talks of European economic crisis and American debt doom, the average man and woman who have to deal with these realities are talking about how to make ends meet. Luxuries of years past have been stripped away, such as two cars in the garage, constantly updated wardrobes, and state-of-the-art technology. But relatively speaking, are these really sacrifices, and do we remain tasked with having to sacrifice much more in order to survive impending economic calamity?

In A Rut Of Self-Indulgence

Despite struggling to make ends meet at the end of every month, I still chuck $100.00 to my mobile service provider in as much time. For what exactly? The essential aspect of a phone is the ability to communicate with the outside world, but not be constantly attached to it, which is what my unlimited data plan encourages me to do. The prepaid phone, even a smartphone model, would cost significantly less by limiting what I can do. Yet I want that unlimited streamlined service, even though I can easily live without it while still having the usefulness of a mobile phone.

Countless families across the country are still stuck in similar ruts of self-indulgence. Consistent credit card bills plus news of a worsening economy plus barely getting by should equal the abandonment of entertainment in favor of austerity. To do anything other than that is logically idiotic. Yet we all continue to essentially waste money on the here and now.

Prioritizing Our Spending

But entertainment and pleasures can't be the only enemy to attack. To be honest everyone needs a night out at the movies and creature comforts during these tough times. We just need to prioritize them much more than we currently do. The major obstacle in our way is not the need for fun and games, which are essential, but our inability to understand the importance of moderation, especially in times like these.

Food is another major source of spending that can probably be seriously revamped by the majority of American families. Studies confirm that American food portions have increased significantly since after the Second World War. Modern American families are not familiar with healthy portions. Reduced levels of food consumption can be hard to commit to for a number of reasons, but it can reduce monthly household spending significantly.

The 2008 financial collapse caused millions of Americans to rethink the way they spent their money. But maybe it will be the unfortunate resurrection of a recession in 2012 that makes Americans realize that “toughing it out” is something they aren't exactly used to. But in tough times, it's an essential part of survival.

Hedging Market Risks To Your Retirement

By Miranda Marquit 1 Comment

The current stock market volatility has many wondering how market risks could affect their retirement prospects. Many almost-retirees found, to their dismay, that the market crashed, wiping out retirement portfolio values, just before they needed that money. While the market has been recovering since 2008, the fear of what happens “next time” has many wondering what they can do to hedge some of the market risks to retirement.

Two of the risks that you are likely to run into include the following:

Market crash just prior to your retirement. This could also include a period of a down market. This means that when you withdraw from your retirement account, you are selling investments at a time when you are locking in losses — and you have to sell a higher volume to meet your needs, reducing the amount of investments in your portfolio.
Maturity on some products at an inconvenient time. Your CD might mature just after interest rates plummet, leaving you no option to roll over at the same yield, or a bond might be called early (or mature), while rates are low.

While you can't completely eliminate these risks (all investment comes with risk), you can hedge against them in a way that can help you limit your losses.

Hedging Market Risks

Diversity

The first line of defense against huge market losses is diversity. When some markets are down, others are up. Consider adding a little more diversity to your portfolio in terms of real estate and commodities, in addition to stocks and bonds. You can also look at diversity in terms of foreign vs. domestic investments, and diversity across sectors, as well as adding some dividend aristocrat stocks to help with your income during retirement — even during a down market.

Stagger Your Maturities

Don't invest in a bunch of CDs that mature at the same time, or invest in Treasury securities that all mature in five or 10 years. Choose different maturity dates, and acknowledge that you might need to have a plan for short-, middle- and long-term investing. A CD ladder can help you create a system that allows you to earn the highest possible yields on long term CDs, while still having the opportunity to take advantage of higher rates when they arrive. Choose bonds of different maturities so that they aren't all coming due at the same inconvenient time. A little staggering can help you avoid having to reinvest everything at the same time — and possibly lose out because of it. Also, make sure you have some investments meant for different time frames so that you have a little more flexibility when deciding what to sell, and when.

Extra Income and Emergency Fund Padding

You can also hedge against market risk by planning your retirement income. Look for ways to build up additional income streams, especially passive income streams. That way, you won't have to rely heavily on withdrawing from your retirement investment account during a down market, and you can leave your portfolio alone to try to recover. (Some even recommend certain, carefully chosen annuities to provide income so that you don't have to deplete your investment portfolio in tough market times.) The same is true of having extra emergency fund padding. Look for ways to build up a supply of money that you can draw on without having to sell investments in a down market.

The Great Depression Ahead And What You Can Do To Survive

By Contributor 5 Comments

You may have never heard of economist and wealth manager Harry Dent but many students of the economy have. Harry Dent wrote, The Great Boom Ahead, which predicted the financial bull market of the 1990’s. He also predicted that the 2000s would see the Dow Jones Industrial Average soar to 40,000 but later revised that down in 2006. His predictions are often extreme but for those who believe that history repeats itself, it would be irresponsible to dismiss his predictions as the words of a dooms day profit. He believes that it won’t be long before the world economies will have a financial meltdown not seen since the Great Depression.

What do you need to know about the details of his forecasts and how dire are they? If he’s right, what should you do to protect yourself against this complete meltdown of the world monetary system? Don’t say we didn’t warn you.

Harry Dent

Harry Dent has taken his share of criticism. Although there are a lot of people who make dire predictions in order to get a little face time with the financial media, Dent has years of research to support his claims. Not all of his predictions have panned out but the research behind those predictions is studied by best of the world’s economists.

One of his best known theories has to do with long term spending habits. He believes that once a person has kids their spending picks up and once their children graduate from college spending turns to paying down debt and saving for retirement. According to Dent, spending peaks at an average age of 50 years old. He believes that the baby boomer generation had an average peak of spending in 2009 which represents that top of the stock market for the foreseeable future.

His Predictions

To sum up his ideas, the only reason we haven’t seen a complete economic meltdown is because the United States Federal Reserve continues to print money and artificially stimulate the economy but the banking crisis has left so many consumers and businesses drowning in debt that there is no amount of stimulus that can allow the economy to recover. The only way to recover, according to Dent, is to allow it to correct without the help of artificial stimulus.

Another one of Harry Dent’s theories is that when a bubble bursts, it returns to its pre-bubble level. This, according to him would put the Dow Jones Industrial Average at 3,600 to 5,000. He also sees gold correcting to a price of $400 to $500 per troy ounce and home prices falling significantly more. Florida, Dent’s state of residence may see home prices fall as much as 30% to 35% before the bottom emerges. Finally, he believes that unemployment could rise to as much as 15%. If his predictions are true, this would represent a crisis not seen since the Great Depression. He believes that all of this could begin as early as 2012.

What Can You Do?

If he’s right, first he suggests selling your home and renting until the crisis comes and goes. He also believes that now isn’t the time to believe that the markets will recover if you need money for retirement. Once the crash starts, demand that your financial adviser pull your money out of the market and in to ultra-safe investments. Once the markets bottom out, it may represent the buying opportunity of your life.

Bottom Line

His critics are quick to point out that Harry Dent has made his fair share of incorrect predictions. He may be too severe in his forecast but it’s hard to argue that with the amount of debt held by governments and even more important, individual households presents a problem. Unless the government can find a way to get household debt to a manageable level nationwide, there is very little that can be done to prevent a meltdown. Most economists agree that further stimulus of the financial markets may be detrimental to the markets.

Do you believe Mr. Dent? If you do, you’re not alone. Let’s hope that he’s wrong.

Fixed Mortgage Rates Fall To Six Decade Low, But Few Can Take Advantage

By Mr. Money 2 Comments

If you're looking to buy a home or refinance anytime in the near future you may have been happy to hear the news this past week that mortgage rates are now at the lowest levels in years. It is good news for those looking to buy, but there is a big caveat. Not everyone will be able to take advantage of the low rates because of a variety of factors.

We're currently looking to do one or the other – either refinance – or if we find the right situation – buy a new home. So what is all the hub-bub?

Low Mortgage Rates

Fixed Mortgage Rates Lowest In Six Decades

Freddie Mac announced this week that the rates for a 30 year mortgage were at their lowest level in 6 decades – down to 4.12 pecent.

Fixed mortgage rates fell this week to the lowest levels in six decades. But few Americans can take advantage of the rates to refinance or buy a home.

The average rate for the 30-year fixed mortgage fell to 4.12 percent, down from 4.22 percent, Freddie Mac said Thursday. It's the lowest level on records dating back to 1971. And Freddie Mac says the last time rates were cheaper was 1951, when most long-term home loans lasted just 20 or 25 years.

The average rate on a 15-year fixed mortgage, a popular refinancing option, fell to 3.33 percent from 3.39 percent. That's the lowest on records dating to 1991 and likely the lowest ever, according to economists.

So rates are extremely low, down to the low 4 percent range. I know that's definitely lower than when we bought our home a few years ago. That's great news if you're looking to buy or get a lower mortgage payment. But even so most experts aren't expecting this news to energize the depressed home market.

Mortgage rates tend to track the yield on the 10-year Treasury note, which fell to an all-time low this week. An uncertain outlook for the U.S. economy has led many investors to shift money out of stocks and into the safety of Treasurys, lowering the yield.

Still, few expect record-low rates to energize the depressed home market. Over the past year, the average rate on the 30-year fixed mortgage has been below 5 percent for all but two weeks. That compares with five years ago, when the average 30-year fixed rate was near 6.5 percent. Yet prices and sales remain unhealthy and are holding back the overall economy.

Sales of new homes are on pace to finish the year as the lowest on records dating back a half-century. The pace of re-sales is shaping up to be the worst in 14 years.

Most Can't Take Advantage Of Low Rates

While rates are low, the unfortunate thing for homeowners and buyers is that most can't take advantage. The reason? Either their credit isn't good enough after the last couple recessionary years, or they don't have enough of a down payment.

Many Americans can't take advantage of this rare opportunity. Some are in no position to buy. Unemployment is high, few Americans are getting raises and many are struggling to shrink their debt loads.

But others can't qualify for the lowest rates. Banks are insisting on credit scores above 700 and 20 percent down payments for first-time buyers. Many repeat buyers have too little equity invested in their homes to meet loan requirements.

Studies have shown that about 40% of U.S. households have credit scores necessary to get a prime mortgage rate, but most people just don't have enough for a 20% down payment. In fact a huge number of folks are now in an underwater mortgage, and won't be able to move any time soon.

So are you in a situation where you can take advantage of the low mortgage rates? Why or why not?

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