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February 2010
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Is Now the Time to Shift 401K Funds into Money Markets?

February 8th, 2010 · Banking, Budgeting, Consumer Info

My sister has been telling me for months that the stock market is in for a correction. Why should I listen to her? She works for a company that handles a large portion of U.S. company 401K portfolios and is in the financial trenches daily. She’s also called 3 of the last 3 corrections in the market. Sure, no one has a crystal ball, but I’ve started to really pay attention to what she says. I’m paraphrasing what she recently posted on my facebook page in response to my comment about moving my money:

There’s talk of a correction (which is typically a 10% drop from the high) – even that misfit Jim Cramer thinks so. All the signs are there. The market grew by 65 – 75% in 2009. How in the heck could that happen? t’s another false economy that’s being driven by false pretenses.

Unemployment
Approximately 1/3 of the country isn’t working:

10% unemployment plus

15% or so under-employment (the number is unclear but high) plus

who just gave up looking

Consumer Spending
Despite the uptick in consumer confidence in January, a large chunk of the population just isn’t spending. Unemployment and uncertainty about the housing market and whether or not the recession is over is keeping wallets shut.

The financial state of PIIGS is terrifying.
What is PIIGS? Wall Street Journal reported that some bearish international investors have coined a new term for the countries that they believe are the weak links of the euro zone: PIIGS — which stands for Portugal, Italy, Ireland, Greece and Spain. Last Friday, the financial industry widely covered the possible default of Portugal.

Commercial Real Estate
Keep an eye on the commercial real estate bubble. The standard contract is 3 – 5 years for ALL commercial real estate. After that time, the lender re-evaluates the business to see if they’re still a viable client. If so, they’ll extend the contract. If not…no dice. You haven’t heard much about it until now b/c the contracts that were signed when real estate was flying high are coming due starting this year. A good source who works in the business indicated that half of the commercial real estate is underwater. Those are bad numbers. Stay tuned.

I have the courage of my convictions (and my sister’s). I moved all of my investment portfolio into money markets and bonds on Friday Feb 5, 2010; my sister moved all of her money before Christmas. My portfolios have recovered significantly from last year’s 40% drop and I thought it was a good time. I’d rather have all of my money for the near future and take a chance on missing any stock market rally which might happen.

How about you? What’s your prediction for the stock market? Have you moved your funds recently? Tell us about it by leaving a comment!

→ No CommentsTags: 401Ks·bonds·commerical real estate·consumer spending·investment protfolio·money markets·PIIGS·stock market correction·Unemployment

A Happy Ex-Bank Customer Speaks About Her Desertion

February 5th, 2010 · Banking

Recently, I was asked about credit cards and banks by a friend of mine. I told her about credit unions and why I thought they were so much better than banks. For a brief review, you can read my article about the credit union revolution. A few days later, I received the following email, which I’m reprinting with her permission:

Dear Kristy,

Thank you for helping me make a decision to look into a credit union in order to dump my bank. And thanks for some information about credit and credit cards. With your encouragement in mind, I did a little research and made a major decision today. I had a wonderful experience switching to a credit union from my bank and wanted to share.

I chose Sun West Federal Credit Union near me. The manager has been in the credit union 30 years! The woman with whom I did most of my “work” , a native Arizonan, has been with this credit union since 1996. I learned that Sun West was originally the AZ. Phone Co. Credit Union. It has great appeal to Good Sam employees because of its location as well as what they offer. We accomplished so much in two hours!

I opened a checking account and added my auto deposits and bill payments which had been attached to my old account. Ms. Nelson (who helped me) got Social Security on the phone and we have redirected my Social Security to be direct deposited to my new account. I will take copies of my durable Power of Attorneys (both my kids) so they will have access to my account as well as be my beneficiaries. I will take my bills (electric, gas, water, insurance, etc) and she will make calls while I’m there and changing the automatic billing instructions.

With a credit rating of 816, I have a Mastercard at a low rate with them. We accomplished a lot!!! They set me up with online banking, password and security questions done. I can’t imagine how I could have been more fortunate! I feel confident this is going a lot smoother than I would ever have hoped after much stewing and consternation over how, when and where to do this.

I will close my old bank checking account next month. THANK YOU, THANK YOU, THANK YOU!

If you’re tired of your bank and wanted to move to a credit union, but thought it would be a big hassle, maybe this little letter will encourage you.

Anyone else have a similar experience ditching their bank? Tell us about it by leaving a comment!

→ No CommentsTags: banks·Checking Account·Credit Cards·credit unions·direct deposit·Mastercard·power of attorney

Free Checking Accounts May Become Endangered Species

February 4th, 2010 · Banking, Consumer Info

The enticement and curiosity induced by the term “free” is universal. Whether it is free shipping, a free lunch, or a free checking account, most of us will be drawn to open the envelope, call the number, or click to read more about the offer. But in the case of a free checking account offer, is free really “free”?

Citibank customers who opened an EZ Checking or Access Checking Account over the past several years were promised just that – free checking services, provided the customer signed up for direct deposit or made at least two online bill payments per month. By agreeing to continue to meet these conditions, these account owners would not be charged the monthly maintenance fees ranging from $7.50 to $9.50, as well as avoid any per-check charges. Certainly a reasonable enticement, and one that many folks decided to take advantage of. And if you’ve ever changed banks and checking accounts, you know that doing so can be a time-consuming effort to reset all your automatic bill payments to new account information.

But lo and behold, on November 2, 2009 Citibank announced that effective February 1, anyone who didn’t have an average balance of at least $1,500 in their combined accounts would have to pay monthly fees or per-check charges. The advertisements for the free checking promotions located online and in the branches themselves apparently lacked the disclosure that this freebie was subject to termination at the bank’s discretion. So what was giveth so freely, was just as freely to be taken away… but not so fast.

After the New York Attorney General’s office made inquiries about the amount of notice Citibank had given customers about the changes, they decided that Citi failed to adequately notify affected consumers about the change. As a result of the action, Citi agreed to allow people who had signed up for the accounts from January 1 to November 5, 2009, to keep their free checking until January 31, 2011. In order to be eligible under the agreement, consumers must have met the offer’s original qualifying conditions in the past year and continue to do so. All affected consumers will receive notice by mail of the changes.

For a full explanation of the conditions outlined in the attorney general’s agreement with Citi, read this letter dated February 1, 2010.

Indian givers? Citi made promises that people were banking on (pun intended), and then changed the terms in mid-stream. It is likely that “free” checking accounts may become an endangered species soon, now that revenue from overdraft charges is likely to be significantly reduced with the new laws.

Has your bank recently tried to change any of your account terms? For most of us, the answer is a resounding yes. Share your story with the rest of us by leaving a comment!

→ No CommentsTags: change checking account terms·checking account fees·Citibank·EZ Checking·free checking account·free checking account offer

Income Taxes: Are You Filing Under the Right Status?

February 3rd, 2010 · Taxes

The deadline for filing your tax return is getting closer. Have you recently been married, divorced, filing for the first time or just introduced a child? Your filing status has probably changed. Determining the correct tax status you should file under will ensure that you do not accidentally pay too much in income taxes. You don’t want to pay too little and wind up owing the IRS a lot of money.

Taxpayers must utilize one of five standard deductions categories established by the Internal Revenue Service. The five categories include: Single, Married Filing Jointly, Married Filing Separately, Qualifying Widow with Dependent Child, or Head of Household.

The easiest tax status to understand is filing under Single. If you claim single filing status, you are claiming that you are not married as of the last day of the tax year or legally separated from a spouse through a divorce or separation decree. If you have no children and have no spouse, you file your taxes as single.

Married couples have the option of filing jointly or separately. In order to file under the status Married Filing Jointly, both of you must agree that filing jointly is the status you agree on. Even if one of the parties in the marriage did not accrue income, you can apply jointly and get a higher standard deduction than if you filed taxes separately. Both parties are held responsible for paying the income tax due when filing jointly.

Couples that don’t agree on filing jointly must then file taxes Married Filing Separately. Each party is held responsible for their share of income taxes regardless of what their spouse may owe. It is wise to complete your taxes using both criteria to see which status will cost you less overall. In general, filing taxes separately will result in higher taxes.

If you are widowed, you may be able to file under the status Qualifying Widow with Dependent Child. If you and your spouse were eligible to file married filing jointly the year they died, you meet the first qualification of this status. Second, you must have a child or stepchild that you are able to claim as an exemption. Last, you must have paid more than half of the living expenses for the home for the tax year.

To qualify as Head of Household, you must be unmarried as of the last day of the tax year and have paid for more than half of the costs of keeping up a home for the year. Further, you must have had a qualifying person live with you for more than half of the year. A qualifying person can include your minor child, stepchild or foster child. A disabled parent can also be considered a qualifying person and may not have to live in your home for you to claim head of household status. You must be able to claim your disabled parent as an exemption in order for them to be a qualifying person.

Taxes are confusing and if you are unsure as to your tax filing status, consult a professional. Tax preparers are paid to know the current tax laws and the tax savings you receive from hiring a tax professional will most likely pay off in the long run. You can also consult the IRS website, or Wikipedia, which I thought did a pretty good job explaining things.

Have any information you want to share? Leave a comment!

→ No CommentsTags: dependent·Filing Status·head of household·married filing joint·married filing separately·pay taxes·Taxes·widowed

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