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July 30, 2008

Did the bank failures get you?

Hello, everyone. Back from vacation and on the lookout for some lessons about our fragile banking system.

I'm looking for local people who got caught in the failure of IndyMac Bank, or the more recent failures of First National Bank of Nevada in Reno and First Heritage Bank in Newport Beach, Calif.

Did you have a CD at any of them? What happened to your money? To the interest you expected to earn? Did you own the CD directly at the bank or was it sold to you through a brokerage? Has the broker contacted you and told you what to expect?

Send me an email at hjbrackey@sun-sentinel.com. I may use your information in my story....

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July 17, 2008

I have a few things to do

....while I'm on vacation starting today. Hope you're wise about your money in the meantime. I'll be back at the end of the month.

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July 16, 2008

More mileage breaks

There are so few breaks available for the cost of driving, I wanted to be sure you knew about this one. The IRS has increased the mileage rate to 58.5 cents. That means, starting July 1, taxpayers can use 58.5 cents a mile to claim deductions for business use of their cars. The IRS normally sets mileage rates once a year, in the fall. But it made a mid-year change this time around, to help people out with the pressures of high gasoline prices.

Looking back, last year, the mileage rate was 48.5 cents. For the first six months of this year, it was 50.5 cents.

Let's hope employers follow the IRS' lead and reimburse their employees at the new, higher rate.

POSTED IN: Taxes (41)

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July 14, 2008

Credit scores may have a credibility problem

John Ulzheimer, president of education services for Credit.com, has an interesting take on one of the sources of the mortgage crisis. Inflated credit scores are to blame, he told me last week.

I always wondered what it really means to repair one’s credit. And what’s going on when companies promise to optimize your credit score.

The only way I know to fix up your credit score is to fix it. To do the right things, like pay bills on time and don’t draw down your lines of credit too heavily.

Ulzheimer clued me in on the system in which credit repair firms or law firms that do credit repair partner with mortgage brokers or lenders. They are paid, by fees or subscriptions, to raise applicants’ credit scores so the applicants can qualify for a loan. The broker, of course, can’t earn a commission unless the deal goes through and the lender makes his or her money only then, too.

Some of the tactics he said a credit repair firm might use would be to get negative information removed from a file – which is completely legitimate – even though the lender may put the information back on at a later date. Or the firm might convince consumers to shift some debt to a business credit card. I’ve noticed ideas on line that go way beyond that, to the point of even encouraging people to get different Social Security numbers to help them hide bad debts.

Score goes up, loan gets approved. But is it a solid deal? “If my score really is 580 and all of a sudden it becomes 650, how will the loan perform when it gets approved?” Ulzheimer asks. A risky borrower will act like a risky borrower no matter how good the score looked at one time.

His point: “The credit scoring system is broken.” And it is being gamed all too frequently. He said TransUnion has estimated 30 to 50 percent of its requests to remove negative information from credit records come from credit repair firms.

His solution: Change federal laws to close loopholes that don’t require law firms and mortgage firms to meet standards set for credit repair. And Fannie Mae and Freddie Mac should refuse to accept loans in which scores have been “optimized.” Both the major mortgage industry giants should require lenders to show them a chronology of all credit scores that the lender pulled during the application period.


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July 13, 2008

Will being thrifty last?

Livin' on less for the long-term, do you think this is the way we'll be?
Someone called it the Costco effect. Once you realize you can buy it -- whatever it is -- for less than you used to pay for it, why would you ever pay more?
If they sell Dom Perignon at Costco as well as at a full-priced liquor store, why pay more?
We've been forced, by this economy and by wages that haven't kept pace with local inflation, to find ways to live on less.
Other forces are pushing us this way as well.
The desire or trend to live simply, to find the simple way to get something done.
The trend toward being green, to have as little impact on the environment as possible.
Now that being frugal is in style, I find people almost bragging on how little we can spend.

Is frugal the new normal?


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July 12, 2008

Got your rebate?

Yesterday, Friday, was the latest day you could expect to get your rebate.
Your economic stimulus payment was to have been delivered by now, no matter what your Social Security number is.
Last time I asked the IRS how many stimulus payments had been made in Florida, I was told they didn't have that information available.
But I've heard from too many people who didn't get their checks yet.
So please, put a comment below if you haven't gotten your check yet. I might email you for some more details.

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July 11, 2008

Foreclosures, let's not be Number One

Answer this one quick: What percent of Floridians would you guess have homes in foreclosure?
Ten percent? Twenty?

It may come as a surprise that between 5 and 6 percent of Florida homeowners are 60 days behind in their payments, according to the credit bureau TransUnion. That was in the first three months of this year. It's a high rate. But I'm betting it's not as high as you might have guessed.

And, another surprise is that TransUnion is predicting that Florida will fall out of first place by year-end.

Nevada may end the year at 7 percent, the credit bureau predicts.

Let's do a Behind on Our Payments Scorecard. On auto loans, 0.65 percent were 60 days behind in the first quarter nationwide. On mortgages 3.23 percent. On credit cards, 1.19 percent were delinquent on one or more cards

TransUnion looks at its 27 million credit records to come up with its stats. That gives you some perspective on the dramatic rise in foreclosures. It is dramatic. It is a rise. But it may not be quite the phenomenon that you think it is.

POSTED IN: Mortgages (30)

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July 10, 2008

Hurricane Season tip

I wanted to remind everyone of the lesson learned during Katrina. Having copies of your records is a good idea, so long as you’re at home. But if you have to hit the road in a very big hurry, you may not bring the right thing with you.

You may, as my cousin did, see the insurance policy on the hall table as you’re climbing up to the attic because the water’s rising.

Here are a couple of solutions: Store your info on a disc and send it to your best friend who lives in another city. Or store it in an online vault. Or put it on a flash drive.

Do you have a favorite site for storing your financial data? I’d like to hear about it.

One free thing I’ve found goes much farther than merely finance. T. Rowe Price offers the Family Records Organizer. You can get it by mail, if you go to www.TrowePrice.com and look under estate planning.

You can also download it here.

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July 9, 2008

Gimme a policy, a proposal, something...

Do you get the feeling that Obama and McCain have not filled a gas tank in the last six months?
That even when they have a day off, out of the public eye, they somehow don't really realize what it sounds like on a Saturday when you can hear grumbling in row after row of drivers at the pump?
That they and their policy-making minions don't really believe that this crisis is changing the economy?
That they have no idea how inescapable the cost of energy is, to all industries, to all consumers?

A day or a week without gas taxes -- McCain's idea -- won't do it. What's Obama's idea? I haven't heard.

POSTED IN: Economy (42)

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July 3, 2008

Believe it or not, credit cards can grow even less consumer-friendly

Your relationship with your credit cards, which might already be testy, may get worse.

The heat’s turning up, both on the industry and on borrowers, says Curtis Arnold, the founder of CardRatings.com, a very consumer friendly site. Arnold is the author of the just-published How You Can Profit from Credit Cards; Using Credit to Improve Your Financial Life and Bottom Line.

The pressure comes from several fronts. There’s the credit crunch. You may have noticed that some lenders are cutting or capping home equity lines of credit. So are credit card companies, Arnold says. If your credit score isn’t the highest, this could happen to you.

There’s the profit crunch, as defaults on credit cards have increased in the weak economy.

And, the industry is facing the possibility of tighter regulation by the Federal Reserve and other financial regulators. The proposed rules call for an end to some very consumer-unfriendly practices, such as cards hiking your interest rate on a balance after you’ve made purchases.

The banking industry opposes the new regulations and Arnold says the card industry has hinted at retaliation. “They say they’re going to have to get less aggressive, that zero percent offers may disappear and that super-low rate offers may disappear,” he said.

Caps, fewer tempting offers. What can you do?

You might want to transfer your balance to the lowest-rate card you can find. But be careful. Check to see if there’s a transfer fee. Arnold says those fees have been going up dramatically.

His best idea: Find a card that charges a low fee and offers a low rate on a transferred balance for as long as that balance exists.

Two he likes: Blue from American Express will charge you a fixed 4.99 percent rate for the life of the balance. The Advanta Life of Balance Platinum Card charges 2.99 percent.

Here’s his full list of low-rate balance cards.

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July 2, 2008

Are you deluded?

It’s okay with me if you want to have delusions about life, but at least peek at reality when you have to estimate how much money you need.

Baby Boomers are not doing that.

MetLife’s recent survey of pre-retirees shows seven in 10 overestimate how much they’ll be able to take from their retirement accounts and still not run out of money. The most deluded: The 43 percent who think they’ll be able to draw down 10 percent a year.

In your dreams. In 1999, maybe. When the Dow rose 25 percent. But not now. When the Dow’s down nearly 20 percent since last fall. Not in this market.

Think 4 percent as a realistic withdrawal rate.

People are still underestimating their life expectancies, too. And I’m sure they’re not looking too closely at the scary subject of health care costs in retirement.

They should. Facing a price tag is the first step to preparing for it.

I’ll be writing soon on the subject of how much you can withdraw in retirement.

POSTED IN: Retirement (9)

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July 1, 2008

Why is there so much debt?

Why is there so much debt? Why do we spend so much? Why don’t we think it’s great to be as frugal as a Depression-era grandparent?

Ronald Wilcox, former Securities Exchange Commission economist and now a professor at the Darden School of Business at the University of Virginia, thinks of consumers’ excessive debt loads, at its base, as a cultural phenomenon. We, as Americans, are an optimistic bunch. We think tomorrow will be better than today. So we borrow.

Our nation’s economy is strong and has attracted tremendous amount of investment capital. So lenders lend.

And we have developed our credit markets to the point where we can finance anything. So we do. “My wife and I are looking for a golden retriever, “ Wilcox said. “And we were offered a payment plan. You can finance a dog.”

As the author of Whatever Happened to Thrift? Why Americans Don’t Save and What To Do About It, Wilcox says you put all that together and we have a savings crisis. We don’t save, we spend.

He’s one of a group of thinkers who recently have hit on the topic and set their sights on changing our collective direction.

The forces in society that encouraged savings have been eroded, says a report “For a New Thrift; Confronting the Debt Culture,” from a think-tank called The Institute for American Values and signed by 62 scholars. (Wilcox says he would have signed it too, but he didn’t know it was coming out beforehand.) It attacks what it sees as anti-thrift institutions, such as payday lenders, credit card companies after they began targeting risky customers and even lotteries, which especially encourage spending among lower-income Americans.

I don't think these forces can be turned back. I also don’t think anyone’s going to go back to Depression-era ways of spending and saving.

But a little less of living large would be good for all of us.

I like more the idea that thrift is suddenly in style. Frugal is the new favorite way to be. I think a cultural change, rather than a political one, will work.

Have a look at Ron Wilcox's blog at www.usthrift.wordpress.com.

POSTED IN: Debt (5)

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About the author
You've got the job of managing your money. No one in school taught you how. But you and I, we can teach each other, how to handle it, how to save for retirement, how to make money last, how to educate the kids, how to make a budget work. The conversations I have with my readers are fun. Money's important, but discussing it does not have to be boring.

Harriet Johnson Brackey Harriet Johnson Brackey, the personal finance columnist for the Sun Sentinel, is an award-winning business reporter. Her columns for 2008 were named "The Best in the Business," a national award chosen by her colleagues at the Society of American Business Editors and Writers.

Brackey has worked at Business Week magazine and at USA TODAY, where she was a founder and part of the original staff of the Money section at the country's first national newspaper. After nearly 11 years there - spent covering the 1980s bull market, the insider trading scandals, the 1987 crash - Brackey left Washington, D.C., and came to The Miami Herald. She spent the next decade writing a column about personal finance that chronicled the stock market's Internet boom and bust, as well as the popular Money Makeover features.

Brackey also has done commentaries for Marketplace Money, which airs on National Public Radio and The Nightly Business Report which is broadcast on more than 250 PBS television stations nationwide. She also has been a radio guest on WLRN’s Miami Herald News.
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