Financial New Year's Resolutions To Keep

Posted on January 03, 2012 by Saldutti

Every January, you plan to make changes – you really do. This time, though, succeeding at some of the items on your resolutions list is imperative, not just for bragging rights but for your financial well being.  To give you a jump-start, DailyFinance.com asked experts to weigh in on what our personal finance priorities ought to be in 2012. With economic uncertainty still the order of the day, your best strategy for financial health is to control the things you can control.

So, under the heading of “small changes that can add up to big savings,” here are 7 financial moves to make in the New Year. 

  1. Trim Your Waistline — and Your Insurance Premiums – Two ever-popular resolutions are to lose weight and quit smoking. Those are good ideas not just for your health, but for your wallet, too.  According to research from eHealthInsurance, smokers pay an average monthly health insurance premium that’s 14% higher than for nonsmokers. Being heavy costs big too: Obese policyholders pay 22.6% more on average than their normal-weight counterparts.  As an added incentive, some employers and insurers are offering rewards in the form of gift cards or discounted deductibles for employees with healthy habits and fewer sick visits to the doctor. 
  2. Become a Smarter Shopper – Try to stay one step ahead of the retailers who are forever luring us with clever marketing strategies. “BOGO” sales (Buy-One-Get-One) only save you money if you actually want the second item. Ditto for “loss leaders” (items the store under-prices so far that it loses money on them) in the hope that once you’re there to buy them, you’ll also pick up some higher-margin items that will allow them to turn a profit on you. Use special promotions and loss leaders only when they can really supercharge your savings.  Take advantage of the power of group buying sites, like Groupon and LivingSocial that offer deep discounts, and special promotions from social sites like foursquare.   
  3. Simplify Your Day-to-Day Finances – What’s complex can be intimidating, and therefore tempting to ignore. Vow to simplify your financial life.  For starters, put bill-paying on auto-pilot. If you’re still writing and mailing checks, set up online accounts so that bills are paid automatically. In addition to giving you easy access to your bank and credit-card accounts and spending history, going paperless has an unexpected benefit: People who pay bills online are happier.

    Automate savings too. To the extent your cash-flow permits, max out your contributions to tax-advantaged savings vehicles – 401(k)s, traditional or Roth IRAs, and 529 plans for college savings.  Also, reduce the number of retirement accounts you have by consolidating 401(k)s from former employers and any other traditional IRAs into one rollover IRA. 

  4. Increase Your Financial Literacy – If the last few years have taught us only one thing, it’s that you can’t afford to be in the dark about money matters. Make 2012 the year to focus on your financial education.  The more knowledgeable you are, the more active you’ll be in planning to reach your financial goals, says Bob Stammers, director of investor education at the CFA Institute, a nonprofit organization of investment professionals. Consider joining an investment club, or take advantage of any investing help that may be offered by your employer, such as one-on-one professional advice or educational workshops. 
  5. Expect the Unexpected – For most of us, it’s less a matter of if an emergency will arise than when. And anyone who’s been out of work for any length of time at all knows how quickly you can deplete your resources.  Start an emergency fund if you don’t already have one. According to most experts, your emergency fund should have enough cash to cover at least three to six months of basic expenses.

    It make take a while to reach that goal, but keeping track of where you spend your money even for a week can help you identify ways to cut back and start saving. Put all your change in a bucket for a month to see just how much money you could be saving rather painlessly.  Consider using that spare change to build or add to an emergency fund. If you’re paying someone to mow your grass or wash your car, do it yourself and stash the extra cash. Not only will having a safety cushion help you when personal emergencies arise, it will also help you feel more comfortable during ups and downs in the economy. 

  6. Pay Down Debt – Here’s a risk-free place to put your money with a surefire return on investment of well over 10%:  Pay off your high interest debt. If you’re getting charged 12.99% on your Visa account balance, and you’re earning 1% on your money market account, take money out of the money market to pay off the credit card — you’ll end up with an 11.99% return.

    Try to pay more than the minimum each month. Bankrate.com’s credit card minimum payment calculator can show you how paying just a little more each month can dramatically reduce overall payback time. 

  7. Do a Basic Budget – One key to getting financially fit is a creating a household budget. You don’t have to get too granular, so skip the complicated categories and subcategories. While having all those details may seem like a great way to help you understand your spending, a budget designed that way is unrealistic to maintain for the long term. 
  • Automate the tracking process as much as possible. Look for budgeting tools that do the work for you – aggregating disparate accounts into one place, downloading data nightly, categorizing/memorizing transactions and more.
  • Monitor your progress. No one gets it right on the first try, so check in regularly to make sure you have a clear understanding of how much money you have spent or have left, and adjust your budget accordingly. 
  • Be transparent. A household budget isn’t a state secret. Keep your spouse or significant other up to date on spending, remaining funds and what the priority expenses are to ensure you’re on the same page.

The New Year is a fresh start. Learn from last year’s mistakes and move on. As for this year’s resolutions, don’t mean to change, do change

Your New Year Money Checklist

Posted on December 29, 2011 by Saldutti

Real Simple magazine suggests that you do these 11 things this month to start 2012 off on the right financial foot.

Rebalance your portfolio. Making sure that your asset allocation is in line with your investment goals is an essential part of managing a portfolio. The beginning of the year is an opportune time to do it, and the process may take only a few minutes.

Track your spending. Whether you use a software program (such as Quicken) or pen and paper, you need to know where your money is going. Break your expenses down into categories–like utilities, insurance, entertainment, and clothing–to identify where you can scale back.

Set short- and long-term financial goals. Whether you want to be debt-free in 10 years or own a house in five, you’re more inclined to save if you have specific goals. So write them down and determine how much money you’ll need to save each month to reach them.

Pay yourself first. Create a regular savings plan. Set up direct deposit from your paycheck into a savings account. You won’t miss money you never see.

Enroll in automatic payment programs for bills when you can. You’ll avoid costly missed payments, late fees, and negative marks on your credit score.

Work toward being-and staying-debt-free. Start by paying down bad debts, such as high-interest credit-card bills and non-tax-deductible debt.

Boost retirement savings. If you can’t afford to max out your employer-sponsored 401(k) or SEP plan this year, try to contribute enough to receive the full company match. If you don’t have a retirement plan at work, fund a traditional IRA or a Roth IRA and arrange for contributions to be made automatically from your checking or savings account.

Review insurance policies. Review all your policies-home owner’s, renter’s, auto, disability, and life insurance. Are the limits adequate? Should the deductibles be raised? Is there a less expensive policy with similar coverage? Are you taking advantage of all the discounts offered to you by your insurance providers?

Check your credit report. Get a free copy of your credit report (the numerical summary of how much you owe and how promptly you pay your bills, which is examined by everyone from lenders to landlords) from annualcreditreport.com.

Make (or update) your will. This ensures that your personal belongings, assets, and investments go to the beneficiaries you choose.

Ramp up your emergency fund. Aim to sock away 6 to 12 months’ worth of living expenses so that in the event of an emergency (a job loss, unexpected medical bills), you won’t have to sell assets or rely on credit cards.

Destroy Holiday Debt

Posted on December 27, 2011 by Saldutti

If racking up credit card debt over the holidays was simply unavoidable, now would be a great time to put together a plan to pay off that debt as quickly as possible. Americans were expected to spend an average of $646 for gifts this holiday season, according to a survey by American Research Group, and many consumers chose to put some or all of that budget on their credit cards. If you were one of them, you don’t have to let a holiday spending hangover ruin the New Year. 

Here are some tips to deal with that holiday debt load and look forward to a less-stressful year ahead, compiled by U.S. News & World Report.

  1. Tally it up – Make a master list of all the debt you accumulated just over the holiday season. Itemize your credit card statements to calculate how much you ended up spending on gifts, holiday décor, food, entertaining, and other holiday-related expenses. Knowing what this figure is can help you set some realistic goals for paying it off and also give you a better idea of how much your household spends, on average, during the holiday season.
  2. Put together a realistic payoff plan – How much can you take out of the monthly budget specifically for credit card payments? Take a good look at your budget–updating it if needed–and set a goal amount you need to set aside for credit card payments based on the numbers calculated in #1. Remember that you need to make much more than the minimum payment to make a dent in your debt balance. If you can’t see yourself paying more than the minimum, start trimming some other expenses to free up funds. Remember that a few temporary cutbacks now will help you save enough to pay down more debt faster.
  3. Consolidate – Take advantage of 0% interest transfer credit cards and promotional rates so that you can reduce total interest payments on your debt. If you know you won’t be able to full amount of holiday debt accumulated within the next two or three months, spread it out over six or twelve months at a no-interest rate and pay down that debt as quickly as possible. Just make sure you’re aware what the interest rate is after the promotional period is over so you don’t end up paying back all of your savings with a super-high interest rate.
  4. Put a halt on credit card spending – Make sure family members who share credit card accounts are aware about the current debt load and let them know you’re working toward becoming debt-free this year. This means everyone has to stop using the credit cards for day-to-day purchases. Set some limits on credit card spending for all account holders, and check your credit card statements regularly to make sure any charges are paid off well before the billing period ends.
  5. Tap into another income stream – This is easier said than done, but if you’re highly motivated to pay off that holiday debt as quickly as possible, you could use another source of income to get rid of debt in one quick sweep. Consider taking on a part-time job on weekends or even turning a hobby into a side business. Be creative and think of a few ways you can generate some income quickly. Selling slightly used items on auction sites could also help you generate some quick cash and get that debt paid off well before the next holiday season.
  6. Pay off debt with bonus money – If your holiday bonus check just came in or you are filing your taxes early and are getting a refund, use that money to say goodbye to holiday debt as quickly as possible. While it’s tempting to put bonus checks and tax refunds into a savings account or make a big purchase, stick to your debt payoff plan and think about how good it will feel to be relieved of this debt load. Don’t just carry this burden on into the next holiday season and repeat the whole cycle. Take care of the debt with any extra cash you have so you can start over fresh in the New Year. Paying off that debt quickly will relieve some financial anxiety and make it easier to budget other sources of income you have throughout the year.

Secret Santas Show True Meaning of Christmas

Posted on December 20, 2011 by Saldutti

Attention Kmart shoppers: An anonymous secret Santa may have paid off your layaway balance. Over the past weeks, news outlets across the nation began to report of Kmart customers having their layaway balances paid in full by anonymous donors, renewing their faith in the spirit of Christmas giving.

DailyFinance reports that anonymous donors have paid off, or significantly paid down, layaway balances at stores in Nebraska, Michigan, Iowa, Indiana, Montana and Pennsylvania.  An unidentified woman handed out $50 bills and purchased layaway orders for as many as 50 people at an Indianapolis Kmart.  “She was doing it in the memory of her husband who had just died, and she said she wasn’t going to be able to spend it and wanted to make people happy with it,” the store’s manager told the AP.  All she asked in return was for everyone to “remember Ben.” 

Most of these kindhearted consumers have called the company in secret, pledging a certain amount of money toward layaway orders that are heavy on children’s’ items.  And while no one person or organization has stepped up to claim responsibility for the wave of good will, Kmart executives said the trend began in Michigan.  “It is honestly being driven by people wanting to do a good deed at this time of the year,” Salima Yala, Kmart’s division vice president for layaway, said.

Some grumpy Grinches will certainly try to pin this one on the discount retailer’s publicity department. But whether it’s a stunt or not, what harm could it do to give cash-strapped families a break for the holidays? 

Although the economy has been rough for the past few years, the holiday season is when families typically feel the crunch the most. An already tight budget doesn’t have a lot of wiggle room for gifts and so the donations that these secret Santas have made end up being a gift to the whole family: a renewed belief in the spirit of giving, less stress trying to come up with final layaway payments the week before Christmas and smiling children and relieved parents on Christmas morning.

Throw An Office Holiday Party On A Budget

Posted on December 16, 2011 by Saldutti

Though many companies are in better shape than they were a few years ago, some employers are still making cutbacks when it comes to holiday budgets – this includes parties. Just 35% of small-business owners are expecting to host a holiday party – the lowest in the 10-year history of the American Express OPEN survey of small businesses. 

Caterers say companies are having smaller parties this year than they did last year. Many that have rented space for parties in the past are instead having the events in their offices. Companies want to let staffers and clients know that they’re appreciated, but they don’t want to do it in a frivolous way.  The folks at TheGrindstone.com came up with a list of some tips to help you throw an awesome but frugal holiday party on a budget.

  • Don’t Get a DJ –  Hiring a DJ is a very easy way to blow a lot of money. Everyone has iPods now. Just hook them up to some speakers and everyone can take turns being a DJ. Or go really old school and bring in a boom box.
  • Make it a holiday lunch or breakfast – By hosting a brunch, lunch or breakfast, you can save a lot of money on alcohol.  While it is a little depressing, if you are tight for cash this may be the best way to go. Plus think of all the headaches you can avoid without alcohol (both literally and metaphorically.) While saving money, your employees will still enjoy having the extra social time, a company-sponsored meal, and a break from work. Plus, this plan might actually be preferable for those who’d rather not spend extra time outside the office with their coworkers.
  • Don’t Rent Out a Space – Another way to hemorrhage money. You could just throw the party in your office. Set up an area for drinks and food, toss up a few decorations and throw on music: instant party. Or perhaps consider having people over to your house if you are a manager.
  • Make it a Potluck – Forget the caterer! Everyone can bring their own special Christmas dish. You always end up with way more food than you thought. Just be sure 90% of the party doesn’t just bring chips and dip. Have everyone in the office agree to bring a light appetizer, with specific individuals scheduled to bring salad and dessert. Or, create a list of necessary courses, and have people sign up for what they want to contribute. The company should still supply the drinks.
  • Have Office Olympics at the Party – To make the party more fun, do fun stuff! You could do office olympics. This could include events like:  Jeopardy (trivia questions for points), pie eating (self explanatory) or Pin the Tail on the Boss (just make sure the boss will go along with it).  You could also just play games. Look for party games you can download free of charge that can then be distributed to the guests. A murder mystery theme can be fun when you print out clues and ask your guests to “sleuth out” the crime. Maybe a game of Liar Liar in which contestants give out some truths and a few lies about themselves and let others decide which is which. This results in someone who is given the title of the office best (or worst) liar.
  • Make it a Theme Party – Who says costumes have to be reserved for Halloween? Spice up your low-key office party by giving it a theme like the 80s or tacky Christmas sweaters.
  • Have the Party on an Off Day – If you need to rent a place out don’t do it on a weekend night. Opt for a Monday or Tuesday. A restaurant may be willing to give you a better price if you book your event for these days. Plus it may make your Monday night a little brighter. Tuesday morning is another story…
  • Give Away Prizes Give away silly prizes or spend a little more money in this area and give out some nice gift cards or gifts (Kindles, Blu-Ray players, iPods, etc.). 
  • Have the Party in 2012 – Have the party in January. It is hard to come back to work after all the holidays so this will be something to look forward to. Restaurants or event spaces will probably give you a price break if you have the party after the holidays. Your employees are probably overbooked for the holiday season anyhow, and may appreciate a January event.
  • Combine Parties – If there are companies that you do a lot of business with, see if they’ll hold a joint party with you. If your business is located in an office building, see if other tenants want to join you. Buying food and drink for a bigger crowd will be cheaper.

Top 10 Business Gifts Under $20

Posted on December 13, 2011 by Saldutti

One of the best things about the holiday time of year is getting gifts for customers, employees and even for yourself. Forget the boring food baskets that will be forgotten by the end of the day. Giving a memorable business gift on a small-business budget means getting creative. Here is American Express OPEN Forum’s  annual list of the best business gifts under $20.

1SeV Travel Boxers  Let’s face the facts – we are never without our cell phones. As a result, Scottevest’s travel boxers are the perfect solution. This apparrel has that all-important pocket for your iPhone or passport. Wear these boxers and you will never be looking for your phone again! Cost: $20

2. The Pillow Tie  Perfect for that boring meeting, long conference call or one-day airplane turnaround, this pillow tie looks like a tie, but inflates with a few breaths to become a resting place for a short siesta. Of course, it’s stain-resistant, as well. Cost: $20

3. Cash Shirt  With that big presentation coming up, your employee needs to feel like money.  Help them become successful with a shirt made of cash (Note: bills need to be added to this gift.). Cost: $8

4. Paper Voodoo Notepad  Competition getting too tough for you and not sure what else you can do? Maybe an employee is not doing their job, and you would like to see them quit? With “Paper Voodoo,” all your problems will be magically resolved with a few little pins. Cost: $6

 5. Hula Girl Computer Duster  Admit it, computer keyboards are disgusting. Who knows what is growing in there! Put a bit of tropical flair into your office cleaning. Of course, it comes with choice of skirt color to match your office motif. Cost: $9

6. Pocket Posh Word Power Books   Our vocabulary is shrinking as a result of too much texting and e-mail. Included in each book are pronunciations, origins, examples and quotes that every business owner will find useful. These books are conveniently sized for travel. Cost: $8

7. Magneat  If you are like most people, your ear buds constantly get all tangled up in your pocket. The Magneat allows you to wind the excess length of cord around the center spindle. When in use, secure it to your shirt or jacket with a magnet. It also holds your ear buds for easy storage. Cost:  $13

8. VS–The Book of Choices  Making decisions is hard in small business. Since practice makes perfect, this book forces you to compare options and make a definite choice.  It includes over 230 illustrated face-offs. Cost: $17

9. Point Made: How to Write Like the Nation’s Top Advocates  Telling a persuasive story is critical for every small-business owner. Each chapter focuses on a tough challenge and provides practical tips of how prominent attorneys have resolved that issue. Cost: $20

 10. Phonekerschief  Never have your phone interrupt an important meeting again. Get in the habit of covering it with the Phonekerchief. The fabric is partially made up of silver fibers that will cancel reception. So even if you forget to turn your phone off, it won’t interrupt your meeting. Cost: $15

U.S. Is The World Leader in Credit Card Fraud

Posted on December 08, 2011 by Saldutti

A new paper in The Nilson report dubbed the U.S. the world’s credit fraud leader, with 47% of the world’s debit and credit fraud occurring on our shores.  This is despite the fact that America only generates 27% of the world’s “total volume of purchases and cash.”

Wheras banking institutions in Europe, Africa, Asia, the Middle East and Latin America have been swift to adopt stricter security systems, such as having users punch in one-time passwords for cards-not-present (CNP) transactions and imbuing cards with computerized chips, U.S. banks have been slower to adopt the new technologies due to fear of alienating their cardholders, said David Robertson, publisher of The Nilson Report.

Credit card fraud is a serious issue that can threaten the health of your credit score. Though the payment card industry is growing at a faster rate than fraudsters can keep up with, according to Nilson, sophisticated thieves can still find ways to tinker with your credit that range from changing your billing address to applying for multiple cards.

After the fact, fraud victims will have to convince the three major credit bureaus to have these black marks removed, however it does take time to undo the damages of fraud, and they may have a hard time securing a loan.

We recommend inspecting your bills and statements once or twice per month and thinking twice before handing out credit card information online or over the phone.

For more tips on how to protect your credit, see our previous post The 7 Dangers of Debit Cards.

7 Dangers of Debit Cards

Posted on December 06, 2011 by Saldutti

When you’re strapped for cash, it’s often easier to opt for plastic instead.  But at many places the choice shouldn’t be between paper and plastic, but what kind of plastic to use. In other words, when to use your credit card and when to settle for debit?  It may be surprising for some, but even your debit cards aren’t safe at certain ATMs. And if you’re traveling, you’ll be even more of a target so forget hotels, gas stations, and restaurants.

The Business Insider has created this guide to the seven dangers to consider before using your debit card.

Standalone ATMS that skim cash – The FBI estimates that a criminal activity called “ATM skimming” costs banks hundreds of millions of dollars per year.  Skimming often involves using hidden cameras or placing electronic devices over the ATM’s standard card reader in order to steal information from a card’s magnetic strip. For these reasons, avoid ATMs if they’re secluded or aren’t officially tied to a bank.

Follow these steps from the Better Business Bureau to avoid being “skimmed” yourself:

  • Cover the key pad when punching in your PIN.
  • Inspect the ATM: Avoid shady ATMS and jiggle the card swiper to see if it’s been tampered with.
  • Monitor your account consistently so you can spot unusual activity.
  • Report fraud immediately to your bank.

Gas stations that can freeze your funds – In 2008, SF Gate reported that scammers drained $45,000 from customers who used their debit cards to pay for gas at an Arco station in San Jose, Calif.  For this reason, it’s safer to use a credit card during gas station trips because you’ll be charged for the exact amount you spent, making it easier to detect any fraud. Conversely when you use a debit card, your account will show a hold, which can range anywhere between $50 and $75, depending on the station, and can last for days after your visit. 

Restaurants and bars where the card leaves your sight – The danger in using your debit card at restaurants and bars is that the card has to leave your sight, which compromises your data.  You may think that plunking down that debit card is the easiest way to settle a check, but in a crowded dining environment, unsuspecting prying eyes (namely the waiter who’s taking your card) can pose a real threat to your bank account.

Foreign hotels that prolong settled payments – Traveling can automatically mark you as an easy target for theft and using your debit card along the way might be a big mistake.  Not only is your information recorded at some foreign hotel you’re not accustomed to, you won’t be able catch fraud as quickly as you normally would back home because the charges will take longer to appear on your statement.  Most hotels require that a card be placed on file during check-ins, but the length of the hold is determined by the hotel and can range from 20% of the total stay to $100 per day.  It can also take up to two weeks upon departure for your hotel account to be settled, which could wreak havoc on your finances. 

Recurring payments that make it harder to resolve fraud – If a company asks for your bank card number, instead of bank details, to set up something known as recurring payments, run!  Recurring payments are different than direct debits because if there is a dispute, you have to go through the actual company, not your bank.  Basically, you are giving the company permission to “take a payment whenever you think I owe you,” explains MoneySavingExpert.com.  It’s also much more difficult to cancel your recurring payments because again, you’ll have to go through the company.

Public Wi-Fi locations that can hack your data – According to Private I blog, it’s much easier for hackers to steal your information through an unsecured wireless connection so don’t even think about using an ATM card at your favorite Starbucks or Barnes & Noble.  If you must use a card, fork over the credit because that will make it more of a challenge for these crooks to steal your data.  If you must do your shopping online, follow these steps on Private I blog to secure your activity

Internet shopping sites and phone orders that hijack personal info – If you like shopping online, protect yourself by not using your debit card. You have no idea how the information is transferred. For example, what if the computer you’re using gets a virus or the website you’re on gets hijacked by hackers?

“You don’t use a debit card online,” says Susan Tiffany, Director of the Credit Union National Association.  If any disputes were to occur, it’s a much bigger hassle trying to get it resolved if you’ve used a debit card and the amount is already deducted from your bank account.  Same goes for phone orders – you never know who’s on the other end of the line.

Gifts That Teach Kids About Money

Posted on December 02, 2011 by Saldutti

How much money will you spend on presents for the kids this holiday season?  According to the National Retail Federation, the average shopper will spend about $400 on family members.  And how much of that is cheap plastic or fabric that will be forgotten in a few short weeks? If you’re sticking to the “hottest toys” shopping lists, probably most of it.

  1. Books – If your son or daughter’s a little bookworm, this is a rich place to start. (And if not, they can learn reading and math at the same time.) There’s Rock, Brock, and the Savings Shock, a story about twins – one who saves and one who spends.  Try Arthur’s Funny Money, about a brother and sister starting a bike-washing business to buy clothes and candy. Or maybe Alexander, Who Used to Be Rich Last Sunday, which is about a boy whose allowance burns a hole in his pocket.  There are plenty more good educational books out there. Credit counseling group Take Charge America has a list of money books for grades 1 through 5, all of which could work as gifts.
  2.  Coin keepers – For kids that need more hands-on learning, a fun place to keep money might teach good saving habits more quickly. There’s the traditional ceramic piggy bank (which can be an arts project too, if you pick a plain one) but also ATMs for kids, money mazes, and cash registers.  Digital coin counters that display a balance may be less fun but offer more encouragement since the growth in savings is always visible. There are also a variety of “three-jar” coin savers like the Moonjar, which encourage kids to split their money into different categories: save, spend, and share.
  3. Games – Playful gifts can be just as effective as practical ones. A game as simple as poker can teach about math and money, especially if you use poker chips. There are also plenty of money-oriented board games, from the obvious – Monopoly – to the obscure, like I’m Debt Free or Charge Large. If you want something the kids are less familiar with but that isn’t overtly focused on money concepts, try Payday or The Game of Life.
  4. Charity – Teach kids about giving back with CharityGiftCertificates.org – you make the donation, and they can pick the charity. A list of options, broken down by category, makes it easy.  There are also sites like Kiva.org. These teach about charity and entrepreneurship, since they involve making micro-loans (as little as $25) to poor foreign businesses. Since you get paid back, this is one of the cheapest gift options, and it will help someone besides your kids.
  5. Investment – What about presents for teens? If you have older kids earning (reported) income of their own, you might start funding an IRA for them. You can only contribute as much as they earn, but Roth IRAs for kids can be easily set up. Add $1,500 a year and, as Stacy mentioned, in 50 years this could be a gift worth a million dollars.  Even for younger kids, investing is an option. Buy them a share of stock in something they like – their favorite video game company, restaurant, or retailer – through a site like OneShare or ShareBuilder, and teach them how to monitor their investment.

Another idea? Start saving for college with a 529 Plan, a gift that can eventually offer a broader education. Most plans have much higher contribution limits than an IRA – many over $200,000, according to the U.S. Securities and Exchange Commission – and are cheaper to get started too. Check out Savingforcollege.com, which has tons of information and options.

These probably aren’t gifts that will have your kids jumping for joy on Christmas, but hopefully they lead to greater happiness later in life — and you can always mix in the educational gifts with the exciting ones.

Credit Scores – Things that Do/Don't Matter

Posted on November 29, 2011 by Saldutti

Nearly 1 in 6 people believe race and gender affect their credit score, according to a recent VISA study published last month.  The study reveals a lot of mistaken assumptions people have about their credit scores. For something that affects our ability to get everything from a home or car loan to a job, life insurance, and a decent credit card, it literally pays to understand what’s going on.  But 42% of Americans don’t even regularly check their score, the study says.

Take a look:

  • Employment history: 59.9%
  • Interest rates on debt: 58.7%
  • Assets / savings: 53.1%
  • Age: 38.6%
  • Where you live: 25.3%
  • National origin: 21.6%
  • Ability to speak English: 21.6%
  • Gender: 17.2%
  • Race: 15.7%

None of these factors has the slightest effect on your credit score. It would be illegal for Fair Isaac (the company that calculates FICO scores) to consider some of these factors – such as race, religion, birthplace, gender, and marital status.  That’s not to say nobody cares about such things as your income and work history. A landlord or loan officer will likely want to know about your salary and employment history. But as a component of your credit score? Not relevant.

What does count?

Raising your credit score may not be easy, but the factors behind it are no secret. In fact, Fair Isaac explains exactly what factors influence your credit score. They even weigh each factor for you…

  • Payment history (35%) – This is your track record of paying back what you borrowed. Accounts in collection, late payments, and bankruptcy are bad; paying on time for a long period is good.
  • Amounts owed (30%) – This is based on the total amounts you owe, and the ratio of what you’re allowed to borrow to what you currently owe, called your “utilization ratio.” Maxing out your credit hurts it; keeping a lot of unused credit available helps it. Ideally, you want to keep your utilization ratio below 30 percent. So if you have a credit card with a $1,000 limit, you’d want to keep your balance below $300.
  • Length of credit history (15%) – This considers the length of time each credit account has been open, and when each account was last updated with payment or usage info. As you might imagine, the longer your history, the better. This is why if you’re going to cancel a credit card, all things being equal, ditch the newest and keep the oldest.
  • New credit (10%) – This includes recent inquiries and requests for credit. Regularly applying for new credit cards or other loans will cost you.
  • Types of credit used (10%) – There’s all kinds of credit out there, from revolving (credit cards) to installment (car and home loans.) Fair Isaac likes you to be well-rounded and sample them all. In short, diversity helps.

Find out your score

You can get a free copy of your credit report from AnnualCreditReport.com. A report from each of the three major reporting agencies – TransUnion, Experian, and Equifax – can be accessed once a year, so stagger them four months apart and you can stay on top of your credit all year long for free. But these reports won’t give you your score, just the background information agencies like Fair Isaac use to calculate it.  Since your credit score is of vital importance, you’d expect to able to get a free look at it now and then. But you can’t – at least not Fair Isaac’s. They charge you $19.95 to see it.

Raising your score

The path to a good credit score is obviously paying your bills on time, all the time, for long periods of time. That being said, however, there are a few steps you can take to try to get faster results.

  • Fix errors. Get your free credit reports and look for errors – they’re more common than you might think. If you find mistakes, challenge them. This page of the FTC website tells you exactly what to do.
  • Try to get bad marks removed. You can also try to have negative remarks removed from your credit history, even if they’re accurate. It’s not easy, but it’s been done.
  • Lower your utilization ratio. As mentioned above, maxing out your credit lines raises your utilization ratio and lowers your credit score. Bring your ratio down by paying down debt, increasing credit lines, or shifting balances.