Finance & Loans

You have more ways to save money

Maximize your tax credits: It is time to find whether you qualify for frequently overlooked tax breaks. These include childcare credit, American Opportunity credit for college education, and the retirement saver’s credit. If you were laid off from your previous employment and you have expenses related to searching for a new employment, add up those expenses before tax time. If you have moved due to new employment, make sure to get credit for moving expenses. If you have missed any of these credits previously, you can file an amended return for last three years to get the deduction or credit.

Review your insurance policies: Life insurance policy premiums are going down for quite some time. If you haven’t look into policy premiums, it may be time to shop around and lower your monthly premium. Also, if you get a lower rate than your current premium, try and lock in for 10 or 20 years. Also, any life changing events such as marriage or relocation should trigger review of your policy.

Time to cut your interest rate: Mortgage rates are at historic lows. Look into refinancing your current mortgage to lower your interest rate. Also, it is time to pay-off or transfer your high interest credit card balances. Watch out for balance transfer fees.

The Bank Holding Company Act of 1956

Written by Samuel Phineas Upham

The financial industry is largely defined by the regulations it must deal with on a daily basis. Banks are able to stay afloat based on how well they adapt to increased regulation, and how they manage to sidestep rules they find unfavorable. Typically, these loopholes are closed by new regulation, but the business model is built on the idea that a bank must factor in the risk of regulation.

Prior to the Holding Company Act, retail banks largely didn’t exist. Banks were rarely allowed to trade between states, and it was believed that bank branching would kill competition amongst banks. Some traders felt that big banks would consolidate financial power in the face of competition.

Of course, banks could form a chain of banks that would allow them to skirt this rule. Because bank holding companies were owned by groups, or groups of individuals, they were able to open independent branches. The concern came when these same institutions were allowed to own non-banking entities. The Fed was concerned that these banks had an unfair advantage because they could simply lend themselves out of any troubles they faced.

The Bank Holding Company Act helped to define those independent banking entities and provide some rules to regulate them. After 1956, a holding company was any company that held a stake of 25% or more of a particular institution. The law also defined a bank as any institution that took deposits and made loans.

In a broad sense, the act provided some oversight to the Fed. Previously, banks were able to incorporate and buy whatever they chose. After the Bank Holding Company Act, banks had to register with the Fed and submit paperwork prior to a merger. The act did have some important loopholes that needed closing, but it was a step in the right direction for consumer protections.

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Samuel Phineas Upham is an investor from NYC and SF. You may contact Samuel Phineas Upham on his Samuel Phineas Upham website

Things you need to avoid in order to get ahead

Avoiding debt is hard to do. Much worse is debt that is overburdening your life and can’t get out. Too much debt leads to stress, promote ill health, and may even lead to bankruptcy. With that in mind here are few ideas to follow.

• Carrying too many credit cards not only lead you to more debt but also wrap you in a vicious circle. One strategy is to pay lower balance credit cards first and not use them again. Be careful when tempting to cut cards which could lead to lowering your FICO Score. Limit the number of cards to manageable number.
• Think twice before charging that unwanted dress. Make a monthly budget and stick to it. Don’t give in to temptations and avoid impulse buying.
• Avoid using credit cards to pay your monthly bills. Paying for weekly grocery, utilities and other recurring expenses should be part of your monthly budget.
• Don’t use those credit cards that start charging interest from the day you use it. If you have to use a credit card, chose the one with the longest grace period better yet with the lowest interest rate too. Pay off the amount during the grace period to avoid paying hefty interest rates.

Get a game plan together to conquer your debt

When you are struggling to balance the budget, credit cards gives you a helping hand. But if you keep doing it month after month, very soon your debt load will go over your head. Credit card companies realize this and they will keep increasing your credit limit if you are a worthy customer. This is a habit that many of us need to break and to do that you need to get a game plan together to get out of debt and create even some savings.

Credit counselors call this a credit management plan. If you stick to the plan, you can get out of debt within a specified time period and will require a certain monthly payment level to be maintained. But the plan and the counseling could help you to lower your interest payment on credit card balances. Savings from interest will help you to come up with higher monthly payments. Plan will help you to avoid considering disastrous bankruptcy and other extreme measures. Once the debt loads starting to go down and no new debt accumulating, your credit score will start to climb again. When the debt is paid off, you can begin to build a nest egg for a rainy day.

A proven strategy to pay off credit card debt

Many of us struggle with credit card debt. We are confused about which balance to pay first. They are torn apart between paying off credit card with the lowest balance, highest interest rate and highest balance. If you have multiple credit cards and trying to get ahead paying off credit card debt, here are some interesting points to consider.

First understand some of the realities. If you are carrying too much credit card debt, let’s say balances equal to half or more of your annual earnings, do not expect to pay off it immediately. If you are faced with a similar situation, you need to start with a credit counseling service first.

If you carry a manageable credit card debt load, keep in mind you need to pay the minimum required payment on all credit cards in order to prevent going into debt collection. Pay the minimum required on lower rate credit cards. You should concentrate on paying off the card balance with the highest interest rate first. So, add as much as possible to those payments while maintaining the minimum required payment on others. Avoid the temptation to pay the smallest balance first in order to avoid paying more on interest.

Pay attention to Required Minimum Distribution (RMD) regulations

Article submitted by Simply Credit Help.

You worked hard and stashed away money in 401(k), 457 Plan or in an IRA. Now, here come RMD. The RMD is minimum amounts that you have to withdraw from your retirement account in the year you reach age 70 ½ and every year after that before December 31. It is the retirement plan participant’s responsibility to withdraw the RMD and may face stiff penalties if failed to do so. If the retiree dies before reaching the RMD age limit, then there are certain requirements that apply to the beneficiary. The IRS Publication 590 explains these requirements.

It is not just IRAs and 401(k) plans; RMDs applies to 403(b), 457(b), and IRA based plans such as SEPs, SARSEPs, and SIMPLE IRAs. RMD requirements do not apply to Roth IRA if the owner is living making Roth IRA more appealing than any other retirement saving vehicle. Depending on the day you started contribution to a retirement plan different rule may apply to plans before 1987.

Your retirement fund holder uses the IRS life expectancy table to the fund balance on December 31 to determine the RMD for each year. The RMD makes tax planning more challenging and those who are reaching the age should plan ahead to address the tax burden.

Proven strategies to handle student loan debt

Nearly two-thirds of young who graduated from college this year will carry an average student loan balance of $30,000 according to some estimates. This may burden the young and hamper saving to buy a home and may push them onto more credit card debt on top of student loan balances.

Some student loan repayments are based on earnings. The Pay As You Earn program is based on 10 percent of the discretionary income and adjusts according to the income. This kind of repayment may require meeting certain criteria to qualify. One drawback of this kind of payment plans is that it may extend the repayment time but you will be burden with additional interest payments. Compare the benefits before you decide to sign up for this kind of repayment plan or to use the traditional 10-year repayment plan.

Look for certain professions that may help to forgiven certain portion of your student loan debt. Teachers and other government employees including Federal, state and local may qualify for the Public Service Loan Forgiveness Program after certain number of years of service. Also, don’t forget to take tax advantages by deducting up to $2,500 of student loan interest paid. Check with the IRS for income limitations.

Proven financial strategies to get out of debt

Spending few hours to review your financial goals and current conditions can pay hefty dividends at the end. Periodically you need to revisit your goals and make changes if needed.

Pay off or lower your non-deductible, high interest debt first. Most of the credit card debt is not deductible on your tax return and carry a higher interest rate than any other debt. Simultaneously many of us carry a mortgage. If you are considering making an extra payment or adding few more dollars to your monthly mortgage payment, take a closer look at your options. Paying off non-deductible loan balances first will save you more in the long run. Once you pay off your high interest, non-deductible loan balances, try to stay away from using them again.

Paying one extra payment a year on your home mortgage will reduce your interest as well as shorten the time of your mortgage. This strategy can lower a 30-year mortgage down to 21 years.

Do not forget to maximize tax advantageous contributions to your retirement vehicles. Whether it is an IRA, 401(k) or 457 plans, your contributions can reduce your current tax burden and provide much needed funds at the time of your retirement.

Errors could ruin your credit

Even if you pay your bills on time and manage your credit, there are other forces that can still drag your credit score lower. Among those errors in credit report, credit record thefts, large medical and other bills that hurt seniors and co-signing loans for others could cause your credit score to go down. Growing number of prospective employers are checking into applicant’s credit reports prior to employment.

Recent review of credit data reveals that one in five credit reports contain errors. Instead of paying for thousands of dollars for someone else to check your credit report for errors, you can do it yourself. You are entitled to get a free copy of your credit report from each of the three (Equifax, Experian and Transunion) credit reporting agencies once a year. Stagger your report throughout the year and review it for errors. If any errors are found write to the credit reporting company to get it corrected.

If you have any open credit cards with no balance owed, do not cancel those credit cards. They help to get a higher FICO score. Credit reporting agencies may not provide you with your FICO score. You can sign up for those companies that provide free FICO scores for limited time periods.

Who is benefiting from rising interest rates?

Your traditional banks are sure to benefit from rising interest rates. The fragile economic recovery may be in danger if interest rates, both short and long-term rates were to rise above current levels.

Interest rates including home mortgage rates are kept at a lower rate mainly due to the Federal Reserve’s $85 billion a month bond buying program as part of its Quantitative Easing (QE) program. Now that Fed is sending signals that it may slowdown the bond buying program in the near future, interest rates are creeping upward. Another reason is the U.S. economy is showing some signs of economic recovery.

Bank interest rates including credit card rates and HELOC (home equity line of credit) are tied to short-term interest rates. The Feds intend to keep its current federal funds rate which is between 0 and 0.25 percent until unemployment rate falls below 6.5 percent and as long as inflation remains low.

Banks are more sensitive to interest rate than any other. Higher interest rate helps banks to make more money. Signs of rising interest rates are sending bank stocks higher these days. The KBW Bank Index rose more than nine percent within the last month.

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