Financial Planning Rockville

Why you need a will

If you died tomorrow, who would inherit your assets?  Your house?  Your Snapfish albums?  If you’re like half of American adults with children, you haven’t made a will and therefore, legally speaking, haven’t answered these questions.

A survey from RocketLawyer.com, a legal services web site, last month found that 50% of Americans with children do not have a will.  Even more alarming, 41% of baby boomers (age 55-64) don’t have one.  The top three reasons cited by survey respondents for not having a will: procrastination, a belief that they don’t need one, and cost.

So what happens if you die without a will?  The state will decide how your property is distributed.  The state will sometimes decide in the favor of those intentioned to receive items, other times not.

Shifts in demographic patterns are making estate plans even more critical.  As the survey notes, in the past five years the number of unmarried couples has jumped, according to the National Marriage Project.  Throw a child into the mix and the surviving partner doesn’t get the same protections that are default under law for a married couple.

Don’t forget your ‘digital estate’
And no doubt you’ve heard about the digital afterlife.  According to the RocketLawyer survey, 63% of respondents don’t know what happens to their digital assets when they die.  Traditional estate planning doesn’t take into account this emerging class of assets — and it’s not just thinking about what you want to happen to your Facebook page or Match.com profile.

Your survivors may not even be aware of the extent of your online presence.  Consider your online bank accounts, email accounts, iPod and all its music, blogs, photo albums, YouTube account, eBay account, PayPal account, e-book collection, Gilt Group subscription…you get the picture.  Even your U.S. savings bonds are online.

Most popular online account services like Facebook, Gmail, LinkedIn and Twitter have developed deceased-user policies, which provide the family or executor of the deceased user with information about what’s required to access the account.  This, however, is a problem most people don’t know that they have.

How to create a will: a primer
– List your significant assets, financial advisors, retirement plans, divorce papers, premarital agreements, and any other such documents.
– Gather employment benefits statements, life insurance policies, deeds to real property, partnership and business agreements and the last two years of income tax returns.
– If you’re married, each spouse makes a separate will.
– Decide who will inherit your property.  After you make your first choices, choose alternate beneficiaries, too, in case your first choices don’t survive you.
– Choose an executor to handle your estate.  Every will must name someone to serve as executor, to carry out the terms of the will. Be sure to let that person know you want them to serve as the executor so it’s not a surprise.
– Identify a guardian for your children.  If your children are under 18, decide who you want to raise them in the event that you and their other parent can’t.  You should also pick someone who can manage your children’s property.
– Identify other decision makers to carry out your health & money choices for you if you’re incapacitated.
– With that information, you can create a will online (there are plenty of online options and tips), or hire an estate planning attorney to help you (they can charge hourly rates of $100 to $500 or more)

Lawyers suing law schools

A large group of recently graduated and unemployed lawyers are suing their law schools for false hope.  A total of 75 alumni have filed at least 15 class-action lawsuits across the country, accusing their law schools of inflating employment and salary data to attract prospective students.   The New York Daily News reported that graduates from the Brooklyn Law School accuse the school of fraud, saying that “attending Brooklyn Law and forking nearly $150,000 in tuition payments is a terrible investment.”

Eric L Bach CPA RockvilleThe school’s Web site reported employment rates of 88 to 98 percent within nine months of graduation, but the students allege these figures included students who had part-time or temporary work unrelated to the legal field, according to the Daily News.

Recent graduates from New York Law School filed a $200 million class action suit in damages for fraud, negligent misrepresentation, and violations of business law.

Financial writer Flexo, at Consumerism Commentary, says that the goal of the lawsuits seem not to merely receive compensation, but to ” effect systemic change in the education industry and associations that accredit law schools”, like the American Bar Association.  He also says it’ll be hard for the students to win their case, since there are many “factors that contribute to unemployment, including the overall economy, local job markets, and the effort, skills, and self-marketability of each alumnus.

Money for struggling homeowners

Eric L. Bach, CPAFor the roughly four million homeowners who have fallen behind on their mortgage payments, the federal government is offering yet another remedy: free money to catch up on their loans.  The effort, called the Emergency Homeowners Loan Program, is the latest in the federal government’s efforts to slow down the flood of foreclosures a necessary step to a meaningful recovery in the housing market, says a Department of Housing and Urban Development official.  For people who have lost their jobs, the $1 billion program offers loans of up to $50,000 that don’t actually need to be repaid, if applicants meet certain requirements.

The goal, says HUD, is to offer short-term aid to people who look like they’ll be back on their feet soon.  But critics say the loans may leave homeowners worse off in the long run.

Rolled out by HUD and the nonprofit housing advocacy group NeighborWorks America, the program is making loans with far better terms than anything on offer at a local bank.  The loans are interest-free.  Payments go directly to the lender for a portion of the borrower’s monthly mortgage, including missed payments or past due charges.  And when the assistance period, which runs for up to two years, ends, 20% of the loan is forgiven with each passing year.  In other words, for qualified borrowers who stay in their home for at least five years after the assistance period and who don’t fall behind on their mortgage again, this money doesn’t have to be paid back.

But some critics say that’s where help for consumers ends.  By taking this loan, borrowers risk falling further into debt.  If they sell their home before the entire loan is forgiven, they’ll be on the hook for the remaining amount.  The same holds true if they fall behind on their mortgage payments again: they’ll need to repay the remaining balance of the loan when they sell or refinance their home.  Separately, borrowers aren’t required to have equity in their home to receive this money, so someone who has to repay this loan risks owing more on the home later than they do now.  For homeowners who are significantly underwater now, the loan may only delay foreclosure.  While the limit each person will get is up to $50,000, loans will average about $35,000 per person, according to NeighborWorks America.

The application process for this program ended July 22, so critics are closely watching to see whether this program succeeds or causes more problems.  If the program is a success, the government may be more inclined to offer programs such as this in the future.

What you should buy in bulk

Buy in BulkExtreme couponing has brought buying in bulk to a whole new level.  Yes, these people are saving a lot of money, but at what cost?  Time, sanity?  For the average person, when it comes to buying in bulk, savings can be hit or miss.  Stocking up on the wrong things can lead to waste and spoilage.  However, if you pick up the right items and find the right coupons for these purchases, bulk buying can save you a small fortune.  Here are ten items you should buy in bulk whenever possible.

1. Toilet Paper

We all need toilet paper and it doesn’t go bad.  So why not buy it in bulk?  Buying in bulk can be up to 50 percent cheaper than just buying a few rolls at a time.  So find a place to store some extra (like under your bed or furniture with storage in it) and save yourself a few bucks.

2. Soap and Shampoo

Soap and shampoo are two more things everyone needs.  Buying these items in bulk saves a few cents an ounce on shampoo or per bar of soap.  While this may not seem like very much, over time it definitely adds up.

3. Alcohol

Would you rather pay $8 for a 6-pack or $14 for 20-pack?  Definitely go with the 20-pack so you can save some money and don’t have to hit up the beer store the next time you want a beer (and also save money on gas because you will be making fewer trips to the store).

4. Office Supplies

Next time you need office supplies such as pens, folders, or staples, be sure to buy them in bulk.  Doing this can save you up to 50 percent off the price you would have paid if you didn’t buy in bulk.

5. Toothbrushes/Toothpaste

If you practice good dental hygiene, you purchase toothbrushes and toothpaste every so often.  You could either buy two toothbrushes for $8 or six for $14. Similarly, you could buy a tube of toothpaste for $5 or get three for $10.

6. Vitamins

Spending money in the name of health is always a good idea.  You can save a few cents per pill by buying in bulk.  Again, this may not seem like very much, but over time the savings add up.

7. Non-Perishable

Food items when it comes to buying food items that will not perish quickly, such cereal, tuna, or soft drinks, opt to buy in bulk.  Doing so is 30 percent cheaper than just buying one box, can, or drink at a time.

8. Blank CDs and DVDs

Next time you want to burn a CD or make a DVD, buy in bulk.  Sure, you may end up with enough blank CDs or DVDs to last you the rest of your life, but you will save 25 percent off the price you would have paid had you not bought in bulk.

9. Detergent

Everyone does laundry, and there is no way to get around it.  By spending a little more to get a huge tub of detergent instead of a smaller one, you can save up to 17 cents a load.

Dealing with annoying co-workers

Eric L. Bach CPA - Rockville, MDUnless you’re ridiculously lucky or have extreme tolerance, you’ve probably had your share of annoying co-workers over the years.  Here are the six most common types and how to deal with them:

1. The interrupter: Whenever you’re talking with a coworker, this is the person who always finds a way to interject themselves.  They answers your questions to other people, they turn the conversation around to focus on them, and you can’t have one private conversation without them ending up in it.

The solution: There’s only one way to make it stop.  Tell it like it is.  The next time this happens, say something like, “Actually, I really wanted to get Jane’s input on this. Would you give us a minute?”  If they don’t back off, say it again: “Thanks. Actually, I really want to talk to Jane about it.”  Say it nicely, but be firm.  Think about it as though you are talking to a 5-year old.

2. The know-it-all: This is the person that has an opinion about everything and loves to tell you how you can do YOUR job better.

The solution: Let it roll right off your back.  The more you ignore this person and don’t let them get to you, the better.  When they offer an unsolicited opinion, say, “Thanks, I’ll think about that.”  And if you find yourself getting frustrated, comfort yourself with the knowledge that this person is more than likely considered obnoxious by many; you’re definitely not the only one annoyed.

3. The slacker: You’re working away and she’s playing on Facebook or online shopping.  Every day.  It’s obvious to you and your other co-workers that she’s not pulling her weight, but for some reason your boss doesn’t do anything about it.

The solution: Try to ignore it.  Sure, it’s possible your boss is letting her get away with it, but it’s also possible your boss is addressing it behind the scenes; you probably wouldn’t know about it if that was the case.  Either way, the answer for you is the same: If it’s not affecting your work, it’s really not your business.  If it does affect your ability to do your job (because you have to take on her work, or you’re dependent on her work in order to do your own job), then raise it with your boss from that perspective, keeping the focus on how it affects your productivity.

4. The grumpy guy: The grump exudes negativity.  Suggestions, new practices, the new guy down the hall – he hates them all and he makes sure people know it.

The solution: Have a sense of humor.  Try to see this person as your own office Eeyore.  If that doesn’t help, remember that this person is miserable.  Happy people don’t behave that way, and remembering that might make dealing with him somewhat easier.  He may actually be dealing with other things at home contributing to his mood.

5. The speakerphone lover: For some reason, this co-worker always plays back her voicemail messages on speakerphone … or worse, has whole conversations on speakerphone, with an utter disregard for how annoying it is to those around her.

The solution: Be straightforward.  Say something like, “Hey Meredith, would you mind taking your phone off speaker? It makes it hard to concentrate.”

6. The blabbermouth: The blabbermouth goes on and on and on.  They’re especially talented at roping you into long conversations that never end when you’re on deadline or trying to make a phone call.

The solution: Be assertive, and don’t let the blabbermouth have so much power over how you spend your time.  Speak up! Say, “Sorry, but I’m on deadline and I’ve got to finish something up.”  If they continue talking, be even more direct: “I need to stop talking and get back to work.”

In fact, with most types of annoying co-workers, the solution is simply to be straightforward and assertive.  Not angry, not hostile, just direct – but that’s something that can make people anxious, so it’s important to know that it’s really okay to speak up for yourself in a matter-of-fact, professional way.  And if that fails, just be glad you don’t live with these people.

How To Have Great Credit

Financial Planning - Rockville, MDWhat do you need to do to get your credit score in the highest range possible?  Before you make any changes, you need to know the most important information used from your credit report in determining your score.   Here are the two things that account for two-thirds of your credit score:

Your payment history: Having a long history of making payments on time on all types of credit accounts is one of the most important items lenders consider before approving you for a loan.

Owed versus available credit: This compares the amount you owe versus the total amount of credit available.  Your credit score can be lower when you use more than 50 percent of your available credit for each account.  The simple reason – when you are close to maxing out on all of your credit limits, lenders see you as a higher risk and more likely to make late payments in the near future.

There are, however, three other factors that account for about a third of your credit score:

Length of credit history: In general, a credit report containing a list of accounts opened for at least 10 years or more will help your credit score.  The score considers your oldest active account and the average age of all accounts.

New credit: Opening several new credit accounts in a short period of time can lower your credit score.  Also, multiple credit report inquiries may be seen as risky credit behavior on the near horizon, and can therefore lower your credit score.

Type of credit you use: Your mix of credit cards, retail accounts, finance company loans, and mortgage loans is considered.

Your credit score ignores your age, salary, and occupation.  It also does not take into account financial gifts, support you receive, or your financial assets.  For this reason, credit scores are less important for borrowers who seek loans that take these factors into account.

About 13 percent of people have credit scores of 800 or higher.  If you look at their credit profile, they have:

• four to six credit card accounts
• no late payments in the past seven years
• at least one installment loan – a mortgage or a car loan (with excellent payment history)
• an average of 10 years credit history per account and a few accounts with 20 years of good history
• a low number of credit inquiries (fewer than three in the past six months)
• no bankruptcies, foreclosures, charge-offs or collections
• debt levels at no more than 35 percent of their overall credit limits per account

Stealth Mode on Facebook

Eric L. Bach CPA - Rockville, MDI’m sure at one point or another, we have all thought about deleting our social networking accounts, but this day in age, that is virtually impossible.  I’m sure everyone is well aware that Facebook has had its history of privacy scandals.  CEO Mark Zuckerberg is constantly trying to push what privacy means in the 21st century, but how available should we all be on the Internet?  Last week, Facebook announced on its Developers blog that it was making it possible for third-party applications to gain access to users’ mobile phone numbers and addresses.  By early Monday morning the Facebook team had dialed back the change until further notice.

Some of the privacy issues have been just too much for users, resulting in cancelled accounts.  But more and more organizations are joining the Facebook Connect network and incorporating the site’s development tools into their own.  It’s getting to the point where you’re at a disadvantage if you don’t have a Facebook account; you can use it to log in with the same username and password on more than two million sites; it’s not just for checking in on your cousin’s newest baby pictures.  So, here’s the trick: Go into  “Stealth” mode – be nearly invisible.  Nobody will be able to view your photographs, see your activity or where you’ve checked in except for existing friends — but still have an account to use around the web.

If you’re ready to move into Facebook stealth mode, follow these simple steps:

• Visit Facebook.com, log in to your profile and click “Account” in the top-right corner.  Choose “Privacy Settings”

• From the “Privacy Settings” page, click on “View Settings” to see who can search for you, send messages to your account, see your education and work settings and more. Change all of these drop-down menus to “‘Friends Only”

• Return to the “Privacy Settings” page and choose “Customize Settings” near the bottom of the page.  This new page will load a number of different privacy options, but you’ll want to click through each one and change the setting to “Only Me” so that nobody else can see your Facebook activity.

• Stay on the “Customize Settings” page and scroll down to “Things Others Share”:  Here, you’ll want to edit and disable settings so that your friends are unable to write on your wall, comment on posts and check you in to places.

• Return to the “Privacy Settings” page and, under “Apps and Websites” in the bottom-left corner, select “Edit Your Settings”:  This page shows all of the third-party websites and applications that you have given access to some of your Facebook information.  If you see anything on this list that you want to remove, just click to remove it from the list.

• Stay on the “Apps and Websites” page, scroll down to “Instant Personalization” and select “Edit Settings”:  Uncheck the box at the bottom of this page to block other websites from accessing your Facebook interests.  Select “Confirm” when a pop-up asks you if you’re sure you want to disable this option.

• Return to the “Apps and Websites” page, scroll down to “Public Search” and select “Edit Settings”:  To keep search engines from finding your Facebook profile, uncheck the box on this new screen.

Spend Less Money at the Pump

Save at the Pump - FInancial Planning - Rockville, MDAt a national average of $3.05 per gallon for regular unleaded, the price of gas has reached its highest level since the fall of 2008.  At that price, gasoline plays a major role in your monthly budgeted car expenses.  In order to help balance out your budget, here are five ways you can save at the pump:

1) Maintain the Correct Tire Pressure

Keeping the correct PSI, or pounds per square inch, in your car’s tires will give you better gas mileage.  If your car is equipped with a tire pressure monitor system, don’t dismiss any alarms as false.  Pressure increases as you drive and tires warm up, so a low-pressure alarm when you start driving that goes away later means tire pressure is on the border of being too low and should be adjusted.  Check your owner’s manual or the label on the inside of the driver’s door for the correct PSI rating.  The number on the tire’s sidewall is the maximum PSI and should not be used.

Don’t Let Your Car ‘Warm Up’ Before You Drive It

Technology in cars built in the past 10 years allows your car to operate at very near its top efficiency the moment it starts.  Letting a car idle, such as when you wait at the curb for a passenger or wait for the heater to kick in, is simply a waste of gas.

Don’t Use a Higher Grade of Gasoline Than Is Recommended

Putting a higher octane gasoline in your car than the manufacturer recommends won’t improve your fuel economy, so it’s not worth the extra price you’ll pay per gallon.  Check your owner’s manual or the label on the gas-tank door for the recommended octane for your car, and fill up with that.  On the flip side, don’t use a lower octane than is recommended, because it may actually worsen your car’s fuel economy and could damage your engine.

Slow Down

Slower speeds win the fuel-economy race and can save you a bundle.  Avoid being a lead foot by accelerating from a stop and by driving over the speed limit on the highway.  Jack-rabbit starts simply waste gas and only get you to the next traffic light faster, where your car will idle longer.  Cars get better gas mileage driving at 65 mph than they do at higher speeds.  Cruise control can help you maintain a steady speed, too, which will further improve fuel economy, especially on the highway.

Get the Junk Out of Your Car

The heavier your car is, the more energy it needs to move, so get all the excess gear out of your car when you’re not using it.  Carrying around items you don’t need only worsens your car’s gas mileage unnecessarily.  In addition, the less aerodynamic your car is, the worse its fuel economy.  If you have a rooftop carrier or carry items such as bicycles or skis on your roof, remove these items when they’re not in use to improve your fuel economy.

How Banks are Spying on You

Financial Planning - Rockville, MDWith lenders still especially skittish about making new loans, credit bureaus and others are offering services that help banks probe into your financial skeletons.  The new offerings include ways to look at your rent and utility payments, figure out your income, gauge your home’s value and even rate your banking habits based on details like whether your direct deposits have stopped.

When applying for a loan, your credit record still matters, of course, but here are some newer ways lenders and financial-services companies are sizing up your financial behavior and credit-worthiness:

Bank-Depositor Behavior Scores

Fair Isaac, the creator of the widely used FICO credit score, is marketing bank-depositor behavior scores, which are used by banks to assess their own customers.  The scores are based on balances, deposit records, and withdrawal activity.  Unlike credit scores, which are most affected after payments are late or credit is maxed out, behavior scores can be a leading indicator of credit risk.  They also can help banks identify which of their customers might be ripe for additional services and rewards programs and which might need special attention because, for instance, their direct deposits had stopped.

Income Estimation

The bureaus are able to use credit-record information, such as the size of your credit lines and the age and size of your mortgage, and plug it into models to predict your earnings.  Those estimates also may be used to double-check the income you report on credit applications or to determine if you should be preapproved for credit.  You can’t see those estimates. But if you are denied credit because of them, you must be given a chance to provide additional information.

Rent Payments

Experian, one of the three major credit bureaus, bought RentBureau, which collects rental-payment data from large property managers and expects to integrate that information into credit records before the end of the year.  Even if those consumers don’t want credit, that information could help them win better rates from insurers, which may use insurance scores based on credit records, and fatten up thin credit files, which some employers check before making hiring decisions.

Collection Triggers

If you owe money, you can run, but you can’t hide.  Credit bureaus can now send daily reports to collection companies when a debtor’s financial status changes—say, if new employment information appears or if a debt starts to decline.  A drop in credit use would indicate that the consumer has more capacity to pay and a better chance of repaying other outstanding debts.

Home Values

As home values have plummeted and foreclosures have soared in many states, all lenders have become more cautious.  Using home values as a factor in credit decisions doesn’t appear to be widespread, but it may come into play.  Of course, it also could work in your favor if you are one of the roughly 25 million Americans who owns a home outright.

Your Wealth

Information about your assets other than homes and cars, which aren’t part of the credit record, may soon play a bigger role in your financial life.  With a better sense of a consumer’s balance sheet, lenders might be able to target potential customers better and also have a fuller sense of their likely risk.  Equifax, another of the big three credit bureaus, offers financial-service providers an estimate of liquid wealth as part of a financial “suite” of information.

As all of these tools become more widespread, those are careful in all aspects of their financial lives may be rewarded, while those who are irresponsible, may face further penalties.

Tie Up Your Credit’s Loose Ends

Credit Score - DebtIt has been all over the news this year:  Americans have really struggled to keep their credit under control.  Earlier this year, FICO, the company responsible for the credit scoring system, said 25.5% of Americans had sub-par scores of 600 or below, and the latest data from the Federal Reserve indicate consumer credit card debt increased by $6.5 billion in the third quarter of 2010.  Despite this, there are a few steps you can take to start 2011 off on the right foot, credit-wise.

Run your credit report- Consumers are eligible to receive one free credit report annually, as part of the Fair Credit Reporting Act, so if you haven’t taken the government up on this offer, then now’s the time to do it.  You can get a free credit report from any of the three major reporting agencies at AnnualCreditReport.com.

Pay off holiday debts before New Year’s Eve- Any debt you carry into 2011 is going to be quite costly, as interest rates currently remain pretty high, at around 14.7%.  Consider paying off your December credit card bill as soon as possible, even if it is before the bill arrives in the mail.

Don’t close the store cards you opened up during the holiday season- Saving 10% to 15% off when buying presents in bulk may entice many consumers to open store credit cards, despite their apparent drawbacks and the fact that a large number of credit inquiries can actually drop your credit score.  However, closing these accounts once you’ve paid off your balance won’t repair any damage done over the holidays.  If anything, it will lower your score even more since terminating an account right after it was opened tells FICO that you couldn’t afford the credit line to begin with.  Keep the card and use it responsibly, only charging up to about 10% of the credit limit.

Review the fine print on your credit card contract- The Credit Card Accountability Responsibility and Disclosure (CARD) Act of 2009 provides consumers with many protections they didn’t have before, but it’s far from being an iron-clad piece of legislation.  For example, the CARD Act doesn’t prohibit credit card issuers from raising interest rates; it just makes it a little more difficult for them to do so.  It also doesn’t require any notice if your credit card issuer has lowered your credit limit or closed your card.

Protect your identity- People should be on high alert for during the holiday season, but, it’s actually right after New Year’s that cyber-criminal come out of the woodwork.  You will be receiving your 1099s, bank statements, and important tax documents in the mail come January, all of which have your name, address, and Social Security number on them.  Make sure you keep a watchful eye out.

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