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Sadly, I don’t think I completely with any of the candidates on either side of the aisle. It seems the one’s I agree with the most fiscally and economically will give me problems socially. That’s why we need debate, and more importantly research on candidate’s backgrounds to glean some clues to how they would actually govern, irrespective of their stated positions (which many candidates conveniently change from time to time). Regarding to members of the media; I could care less if you are biased. Most people are. Some media members actually do an admirable job of remaining objective. For the rest: Just be kind enough to actually reveal those biases, so that your audiences can actually see here you are coming from. Contrary to the beliefs of some, talk show hosts are not reporters, they’re commentators, and so can be as biased as they wish. They typically leave no doubt as to where their biases lie.
 

One note here which will go a long way towards revealing my bias on the subject of taxes; those who would raise our taxes always speak about how much reducing or slowing the increase of taxes would cost. I think that says a lot about where their sentiments lie. They conveniently omit any discussion about where that money goes if our government doesn’t get it’s hands on it, and the ultimate effect on our nation’s you’re your personal) economy. Invariably, taxing a nation to prosperity has been shown to be an ineffective strategy for economic development. I’m not in favor of eliminating taxes, as obviously the government needs money to provide services. It would be nice however, if they would actually use our money efficiently and give less of it away. Now that that’s out of the way…..

How are the presidential candidates going to treat your money??

John McCain –
The Senator from Arizona got a nice kick in the pants from the winner take all Florida primary and the endorsement of ex-Mayor Rudy, who looks to have committed a major political blunder by overlooking the earlier primaries. What was he thinking? Who can tell, but I’m sure he has greater political minds than mine on his payroll. Let’s take a look at McCain’s record and statements regarding taxes and economic strategy.

On the Record Support of:

NAFTA – Yes (Nov, 2004)
GATT – Yes (Nov, 2004)
WTO – Yes (Nov, 2004)

Arizona tax burden as a percentage of income (CNN Money, 2006) - 10.1%

Position on Bush tax cuts of 2001: Voted Against. Why? "I cannot in good conscience support a tax cut in which so many of the benefits go to the most fortunate among us, at the expense of middle class Americans who most need tax relief," A debate about who actually pays most of the taxes by total dollar amount, who can most afford them, and who creates jobs by investing and creating new business, as opposed to consumer spending in the economy will follow later. Ditto a debate regarding the relationship between total tax revenues and top marginal tax rates.

Voting record on taxes during terms in the Senate includes the following votes:

Most famous for his co-sponsorship of McCain-Feingold Campaign Finance Reform Act. It does seek to control campaign contributions, but from my admittedly biased perspective, I view this as an assault on the First Amendment (right to free speech). I’d rather let candidates have all the money they want from any sources, then force full disclosure, with positively draconian penalties in the event they failed to do so, or were found to be obstructing or confusing the disclosure process. At least we’d know who was buttering their bread. With the M-F piece of legislation the candidates with the personal resources can self-finance their campaign to whatever level they desire. The rest of us, who have to rely on contributions, are effectively screwed.

• Pay as You Go (SB 2020): Voted For (fully reinstate the pay-as-you-go requirement through 2010)–, 11-17-05 , Sponsor(s): Sen Feingold, Russell D. [WI]; Original Bill: Sen Grassley, Chuck [IA]
• Tax Increase Prevention and Reconciliation Act 2005 (HR4297): Voted For (provide for reconciliation pursuant to section 201(b) of the concurrent resolution on the budget for fiscal year 2006) passed Senate 2-2-2006 with 92% of Republicans supporting and 66% of Democrats opposing passage. Sponsored by Rep. William Thomas (R-CA)
• Increase of Top Marginal Tax Rate (S Amendment 2610 to SB 2020): Voted Against. This would waive the Budget Act to enable adoption of an amendment to restore the 39.6 percent income tax rate for individuals earning more than $1 million annually. It would also reinstate the pre-May 2003 capital gains and dividends tax rates, and repeal the scheduled phase out and termination of the limitations on personal exemptions and itemized deductions.
• Earned Income Tax Credit (S Amdt 2616 to S 2020), Senate vote date 11-17-2005: Voted For – This measure would accelerate marriage penalty relief for the earned income tax credit, to extend the election to include combat pay in earned income, and to make modifications of effective dates of leasing provisions of the American Jobs Creation Act of 2004.
  

McCain’s platform and/or stated positions what he would do with taxes if elected includes:

• Lower corporate income tax rate from 35% to 25%
• Maintain Bush tax cuts
• Change the estate tax rate to be 15% on estates over $10 million
• Eliminate the Alternative Minimum Tax (AMT) (Yea!!)

Mitt Romney –
Mitt Romney didn’t serve in the U.S. Senate. His political experience is an executive, rather that a legislator, as Governor of Massachusetts. As such it will be impossible to directly compare the 2 leading Republican presidential candidates on a vote by vote basis. However, there are many clues to how he would try to steer the U.S. economic policy. As CEO of MA, he had to contend with a democratic legislative body, similar to what he would face if he is elected President of the United States. He also has executive experience as head of the Salt Lake City Olympics Organizing Committee and CEO of Bain Capital Management, and head of the Republican Governors Association.

Did not seek reelection for Gov so he could campaign full time for the Presidency (I think all candidates should do this. Take a look at how much time candidates are spending campaigning, while they are being paid by their constituents to govern)

Governor Romney did fulfill his campaign promise to balance the budget without raising taxes, however he did impose some new government fees. This is a nice way of raising taxes without actually raising taxes. He attempted to close a number of tax code loopholes, but was stymied to an extent by the business community (where all the jobs come from) when he imposed fees and raised existing fees to the tune of $170 million for fiscal 2006. After the business community went nuts, about  half of these were eliminated. He earned the affectionate nickname of Fee-Fee while MA Gov because of his affinity for creating new fees and raising existing ones.

Massachusetts tax burden as a percentage of income (CNN Money, 2006) – 10.3%

Romney’s platform and/or stated positions what he would do with taxes if elected includes:

• Reduce the corporate income tax rate from 35% to 20%

• Reduce the bottom income tax bracket from 10% to 7-1/2%
• Eliminate the estate tax
• Keep the AMT, but index it to inflation (Would he first revise it, then allow the index to compensate for future inflation??)
• For taxpayers with an adjusted gross income of less than $200,000, Romney would eliminate interest, dividends, and capital gains taxes. (For those of you who think that’s just another “tax cut for the wealthy” take a look at your 401(k) or IRA, then pop off)
  

Romney quote-  “We have, in the federal government, 342 different economic development programs, often administered by different departments. We don't need 342. We probably need a lot fewer than 100 of those.”  Weather or not he would actually eliminate any government agencies or shrink government if elected is anybody's guess.

He was a frequent user of the line item veto (800+ times, 700 of them later overturned by the State Legislature) when Governor in an effort to reduce spending. He will not have that luxury as President, so what the heck is he going to do?

Stay tuned for more soon.. 

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 Saying of the Day: A good government should seek not to maximize government revenue, but instead to maximize citizen revenue.

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How to Save Money on Food
The one sure way you can save money on food is to eat out less. Many of us are addicted to the convenience of eating our meals out, or having meals delivered. Instead of buying groceries at the market and preparing our lunch, it's all too easy to swing by the local deli, drive through a fast food restaurant, get a latte and sandwich at Starbucks, or grab something from the lunch wagon. The problem is that any of those victual solutions are at least twice as expensive as buying a loaf of good, whole grain bread and the sandwich fillings of your choice (unless you like blue crab and Brie sandwiches).

Say you like Boar's Head pastrami seasoned turkey breast, and swiss sandwiches on whole grain Chibatta rolls, loaded with veggies. If you buy a pound and a half of meat, a 6 pack of rolls, half pound of swiss, a tomato, an onion, and a few other assorted veggies (making sure you get specials on everything) you'll have about $17 invested in the week's lunch. The best thing is that you'll be able to invest the balance of your former lunch funds into your IRA instead of your belly. If you typically spend $7.50 a day on your lunch, that's $37.50, so there's a $20 IRA contribution.

It really does add up, and as an added bonus it's probably healthier than what you were eating before, so not only are you saving money, but you're also saving a few inches off your waistline as well. If you did this beginning at age 25, that extra $20 a week, assuming you work an average of 49 weeks a year, will add a whopping $274,000 to your retirement savings! That's one expensive lunch you were eating.

Another great way to save money if you have lunch out every day is to forgo the soft drink and just get a water instead. No, not a bottled water (they are a huge rip off), but just a cup of water from the fountain. That will save you about $1.50 per day, and it's healthier for you. Doesn't sound like very much, but again, if you began this practice at 25 and worked until 65, you'd have an extra $102,600 saved in your retirement fund.

Another surefire way you can save money on food, and I've posted on this before, is to shop at warehouse food stores. By skipping the Albertson's, Kroeger, Safeway, Winn-Dixie variety of grocery stores, you can chop as much as 50% off your monthly grocery bill. My typical savings are around 35% by shopping at my local warehouse food store, over buying the exact same foods a mega-chain market. If they only had a Pharmacy, I'd never go to the other stores again.

Don't be brand loyal. There's no money in it. Many of the different brands of foods you buy are actually produced and packaged in the same factories as one another. It's a common practice in many industries. Products are made in one factory and then private labled with packaging from different brands. Make sure the quality increase is real, not just perceived when you choose a big name brand over a store, regional, or generic brand. Sometimes there really is a quality difference, but do you really need the additional quality at the added expense? If the answer is really yes, than by all means, buy the more expensive product, but at least take the time to analyze the question first.

Be aware of buying larger quantities of food just to get a lower price. For one thing, the price isn't always lower. It usually is, but not all of the time. Cross multiply to check the unit cost before you buy. The other pitfall to buying the large quantity containers is that you may not use it all and some will go to waste. If it's an item that your family really goes through, that's great, but if you're buying a very large quantity just to get a good deal, make sure that you're actually going to use all you are buying, otherwise it's not such a good deal, is it? Another problem is that large containers can contribute to large portionitis, a disease that has been afflicting many Americans over the last 2 decades. You may be eating more due to the larger container size. That's not so hot for the ole' waistline and it wastes your money.

Other miscellaneous ways to save money on food ;

• Look for foods that are near their expiration date. You can ask the manager for a discount on these items, and depending on the circumstances, you'll often get one.

• Get to know where the happy hours are that offer free food. If you're creative you can have a happy hour beer for $1.50 and get plenty of food you can call dinner. Don't laugh, I've seen places that offer freshly cut roast beef sandwiches and other niceties.

• Watch out for the sales. Take a good look at the sale prices, sometimes they're really not that good, or they're on items you'd have never bought anyway. Buying sale priced food just because it's a good deal on sale, if you would have never bought it anyway, is just adding to your food budget. This is true unless you replaced an item you usually buy with the new sale item.

• Go online to look for food coupons at one of the many coupon sites. If you have favorite foods, look at the manufacturer's website. They sometimes have either factory direct specials or down loadable coupons.
  

Hopefully these tips can help you save some money on food. See yesterday's post for how to save money on housing and your car.

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Now, on to how you can save some money, which you can spend on shoes or just about anything else. Hey, maybe you'll want to save or invest it. There will be some terrific investment opportunities if the markets continue to drop as they've been, a few days last week not withstanding. One you'll want to personally avoid is spending your hard earned money on a pair of $150 basketball shoes, no matter how great they make your feet feel, or how envious it makes the other guys on the team.

If you're to be saving money there are many money saving opportunities if you'll take the time to find them. According to the US Department of Labor statistics on consumer spending for the year 2005 (revised totals released in 2007) average American households spent the following:

1 - Shelter and associated expenses $15,167 (32.7%)
2 – Transportation $ 8,344 (18.0%)
3 – Food $ 5,931 (12.8%)
4 – Pensions and Social Security $ 4,823 (10.4%)
5 – Health care $ 2,664 ( 5.7%)
6 – Entertainment $ 2,388 ( 5.1%)
7 – Clothing $ 1,886 ( 4.1%)

The household expenses occupying the greatest percentage of our income obviously offer the greatest potential for savings. It's notable that Americans spend, on average, more on transportation than they do on food and clothing combined. If one takes into account that many Americans have no personal vehicles, and spend relatively little on transportation, that figure looms large indeed for those who do own a car truck or van (in many cases, all three!).

Since housing is the largest single component of household expenditure, it offers, for most, the greatest potential to save them significant money every month, so I'll begin there. Here are some ways you can save money on housing and related expenses.

How to Save Money on Housing

The largest component of housing expenses is either your rent or mortgage, whichever applies. Right now one of the best things you can do would be to refinance your mortgage to take advantage of mortgage rates that seem to have fallen through the floor. Before you rush to refinance, however, you'll want to analyze your current mortgage to find out what you're paying now. Remember that when you refinance you'll likely incur additional expenses, and that the 15 or 30 year clock will reset.

As an example, if you're paying 7.5% on a $250,000 mortgage, your monthly P&I payments will run you about $1,750. If you refinance that down with a 30 year fixed rate mortgage that was at the current average interest rate of 5.47%, your new payment for P&I would drop to $1,415, hardly a small monthly savings. There aren't many single things that will net you a monthly savings of over $300. Obviously larger mortgages will have a greater potential for savings and smaller ones....well, you get the idea.

Before you go running off half-cocked, remember that there are other costs associated with refinancing that you may have to pay, such as appraisal fees, processing fees, application fees, origination fees, and title fees. Some of these you may be able to get the lender to drop i.e. application fees and others you may be able to negotiate down. As a general rule, you should try to negotiate everything if you're serious about saving money. Why? Because, if you are not paying them up front, they will be rolled into the mortgage and you'll pay interest on them for the term of the mortgage. Needless to say (but I will anyway) that this can add up to be a substantial bit of money. For every $1,000 that you pay 5.47% interest on for 30 years, it will cost you an additional $1,042 in interest alone over the life of the loan. That does not take into account any tax savings on your mortgage interest, or the time value of money, but it does show that you'll end up paying more than double what the dollar figure was on your mortgage documentation.

You should look at the fees charged by your lender first. It's there that the lender has the greatest latitude to make changes. If they are trying to charge you a fee based on a percentage of your loan, that would be where you should concentrate most of your negotiation. If they are trying to charge you 1 or 2 percent (1 or 2 points), that is going to be a rather large dollar figure. As luck would have it, it is also the fee that lenders have the most authority to change.

Remember that brokers are making money off the yield spread premium (The yield spread premium is the cash bonus received by the broker from the lender. The greater the difference between the wholesale interest rate and the interest rate of your mortgage, the greater the broker's payment.) as well as any application fees or origination fees charged by the broker themselves. It's a great bit of double dipping. You can see that the broker is already being compensated by the lender for getting them a new customer. You should have to pay as little as possible. I saved myself about $1,500 by negotiating the fee down. If I had to do it again I would do even better, so should you.

You can also save a substantial amount on energy costs depending on where you live by doing some simple things. If you live in the desert southwest you'll want to maximize the efficiency of your air conditioning system, for example. There are ways that cost very little, or no money that can provide dramatic savings. In the summer make sure the windows on the south and west side of you home are covered to prevent incoming heat and taxing your A/C system. It's best to put shades outside the home to stop the sun's energy from hitting the windows in the first place. You'll notice a dramatic reduction in your air conditioner's workload from this, especially if you have large windows facing south and/or west, and it will cost you little or nothing.

Make sure all your ductwork in the attic and/or crawl space is well insulated. If it's not, you're losing much of the heat or cool you're paying for before it ever reaches the vent into your house. Many older homes are deficient in this area. (Try this in the spring or fall, that way you're not in your attic in the heat of summer or the cold of winter. Trust me, that's no fun at all) It may be an unpleasant job to wrap all your ducts, especially if you have to go into a 2' crawl space under a 60 year old house, but it can pay handsome dividends. While you're down there, take a look at the pipes and the insulation under your floor. Not only can you save money by ensuring your floors are well insulated, but you can keep your floor much more comfortable during cold winters. Check with your utility district, state, or county. Many have programs to help offset the cost of such home improvement projects.

Make sure all vents in unused or little used rooms are closed. There's no sense in wasting money there. Check all doors and windows to make sure they are caulked and weather stripped. It won't cost much to do this, but imagine if you will a larger hole. A 1/8” crack at the bottom of a 36” door is like having a 4” square hole in the door. If you came home from work today and found a 4” square hole in your door, you'd probably rush out to Home Depot for a new door, so don't let the seemingly little cracks go untended.

If you have old hot water radiators, put foil reflectors behind them to prevent heat from going directly into the wall behind them. That reflective foil will redirect heat into the room where it belongs and increase the apparent efficiency of the radiator. Lastly, President Carter may have been a complete moron when it comes to things economic and foreign (maybe things economic were foreign to him?), but he had it right when it comes to setting back the thermostats in the winter and raising them in the summer. It costs not a dime, but you'll reap nice rewards from this simple strategy.

How to Save Money on Your Car

Ah, now the next household spending category, and one of my favorites, the automobile. As an underfunded Porsche enthusiast (underfunded to the point where I don't own one) all things wheeled and motorized are near and dear to my heart. Unfortunately they're the same to my wallet. Let's face it, Americans spend a ton of money on their vehicles and associated expenses. Probably way too much when it comes right down to it. We're lucky we don't have the high fuel taxes that some of the poor Europeans have to pay, although there are many here who would love to emulate the Continentals on this point.

If they choose to give up their vehicles to take it, public transportation is said to save the average American $6,200 annually (publictransit.org figures, no agenda there) even if they are overstating it by 50%, that's a healthy amount of savings. Many people think only about fuel costs when deciding to take a trip by car. I know, I see many otherwise-highly educated friends make this mistake all the time. You should think about all the other costs associated with driving your trusty car. Every mile you drive is that much closer to the time you'll need to buy tires, brakes, an oil change, and any other maintenance your ride may require. The next time you pull in for your 60,000 mile service you'll know what I'm talking about.

In case you're tempted to skip it, or any other maintenance, don't. You may void your vehicle's warranty and any maintenance you fail to perform will only hasten your car's demise, requiring you to shell out big dollars for another one. It's a great example of false economy. The number one you can save money in your car is not to drive it. Obviously that won't get you to work, so the next best thing you can control is how you drive. Remember, smooth. I see so many drivers that seem to think the accelerator has only two settings, on or off. Consequently they do a bit of herky jerky to get down the road. Hey, that might be you. The next time you're driving, concentrate on how you use the gas pedal. If you find you're constantly giving it gas and then letting off, practice holding a constant speed while keeping the engine revs constant. You'll be rewarded by getting much better gas mileage and no laughs behind your back as a bonus.

If you have to run premium gas for your car, fine. Personally, I would check this before I bought the vehicle, because the thought of using premium for a daily driver gets me all worked up every time I pull into the gas station. If you don't have to use premium gas you're only wasting money by doing so. If you use top tier (not the same thing as premium) gas from the likes of Chevron, Conoco-Phillips, Shell, or Texaco, you're getting the enough detergent to meet the demanding Top-Tier detergent standards in all grades of fuel, not just premium. You're not hurting your car by using regular or mid-grade if your vehicle does not require it, unless you experience heavy knocking or pinging noises from the engine without using premium. If you do need premium to avoid these noises, and your car is only supposed to require regular gas, you should get service, as you have other problems.

So the key points to save money with your car are

• Control how you drive – No quick stopping, Don't maintain speed until right before you have to stop, and then stomp on the brakes. Anticipate a bit. Remember, every time you have to use the brakes you're turning your hard earned gas money into waste heat.

• Only use premium fuel if you have to. If you don't your wasting $.30 a gallon.

• Make sure your car is well maintained. The easiest thing you can do is make sure your tires are always inflated to your auto maker's specifications, as you'll find on the door jamb sticker. The other easy and inexpensive thing is to keep a clean air filter installed. A dirty filter will kill engine efficiency and waste gas.

• Clean out your car. Hauling all your tools and other garbage around takes extra gas and costs you cash. It doesn't even cost you anything except an hour of your Saturday.

  Shop around for everything you use on your car, such as repair and auto insurance. Comparing prices for the same level of service from different autocare providers or insurance comapanies can generate a pretty substantial savings, so do it. 

Tomorrow I'll look at some ways you can some money on other things on the list, such as food, health care, entertainment and clothing.

Can You Really Burn Water in your car as a way to dramatically increase your gas mileage and save money on gas? Some people insist you can. I don't know if you can, but it sure sounds good. Look at this.

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The coach is dedicating his game tonight, which he'll coach sans footwear, to raise awareness for the charity, with the goal of getting 40,000 pairs of shoes, which he will personally deliver to the kids. Coach Hunter definitely has a knack for publicity, because his campaign appears to be an unqualified success. A Converse executive even appeared on the show to donate 15,000 pairs. LA Gear had earlier donated over 5,000 pairs. If you'd like to help out the kids on this one, find out more about the how to give shoes here.

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What are the causes of this dramatic increase in house foreclosures, and house foreclosures in general? Traditionally the top 3 causes of foreclosure for residential mortgage holders have been medical problems, divorce, and unemployment. Has this changed as foreclosure numbers continue to do their Sir Edmund Hillary impersonation? If the causes of foreclosure have changed, does this also change what the average troubled homeowner can do to prevent them? According to statistics released from Countrywide financial in the summer of 2007 the traditional top three causes of foreclosure are still at the top. Interestingly, the Countrywide statistics attribute adjustable rate mortgage payment adjustment as the cause of only 1.4% of foreclosures. Weather or not the increased mortgage payments were contributory in any of the other foreclosures was not revealed.

Countrywide did attribute 6.1% of foreclosures to investors who were unable to sell their properties in a softening real estate market. Presumably such investors would be more likely to let properties fall into foreclosure than would homeowners facing a similar situation with their primary residence. That could possibly account for part of the relatively high percentage of foreclosures experienced by these investors. As an aside, Countrywide indicates they have modified approximately 81,000 mortgages to help prevent mortgage holders from falling into foreclosure, while the Mortgage Bankers Association just reported that 54,000 such modifications took place industry wide in Q3, 2007. Do these numbers add up? Countrywide may be counting some of the 180,000+ mortgage holders who restructured their payment plans with lenders in the same Q3 of last year. The MBA indicated that the difference between a payment adjustment and a modification is that modifications include interest rate adjustments.

If you do need a mortgage however, times have never been better to get one, if you can pry the money from your lender’s clammy fingers, as mortgage interest rates have dropped to near record lows. As this is written, Bankrate.com is reporting the average interest rate on a 30 year, fixed rate mortgage is an attractive 5.31%, while a 15 year loan will reward you with an average 4.82%. This points to the importance of refinancing an ARM, if in fact you still have one. Most people who have an ARM have already been frightened into converting to a fixed rate mortgage by the voluminous press regarding foreclosures and other mortgage problems.

If you have not done so, and you’re not planning on selling your house soon, it would be prudent to take advantage of these low rates. Not to sound like one of those ads we all hate for mortgage lenders, but it really is a good idea. It amazes me that so many people bought well over their heads using one of the plethora of creative mortgage products that were introduced in the first 6 years of this decade. If you were one of these folks, take advantage of the silver lining that our current economic fears have spawned, historically low mortgage interest rates (that we thought would never be back).

If you are facing foreclosure, there are things you can do to help head off the proceedings at the pass, so to speak. I did a post on how to avoid foreclosure a few months ago which you can reference for more information on avoiding or stopping foreclosure proceedings.

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Overseas markets, after experiencing some dramatic gains over the last few years, are showing signs they may be succumbing to something akin to rampant panic about the future of the U.S. economy. The major markets in Germany, Brazil, and India all fell by more than 6%, and the Hong Kong exchange dropped by 5-1/2%.

Where does this market drop, coupled with record energy costs, and a shaken credit market, leave you, the investor, business owner or employee, who's wondering what the future will bring? Funny, that's who the whole thing depends on. The entire economy is a veritable house of cards, built on the backs of consumer and investor confidence. If investors and consumers get sweaty palms and stop pouring money into the whole thing, it's just like a fireman on a train neglecting to shovel coal into a hungry boiler. The train will inevitably slow. If that happens as the train is on an uphill climb, that slowdown will occur more rapidly.

What can you do to ensure that your economic future is isolated from the world wide jitters to the greatest extent possible? Nothing you do can completely ensure that you'll be free from a chance of a bit of economic doom and gloom, but in every market, no matter how dire, there lies opportunity. Your job is to find that light in a dark economic tunnel.

Where to look? Well, you have a few choices. The demand for some things will never slow as much as the demand for others, no matter the extent of economic downturn. Such products have a relatively inelastic demand, meaning that the quantity demanded of these products or services is relatively less price sensitive than others. The price can drop and demand will not go up all that much, but then neither will it decline when prices go up.

Still other products and services are actually in greater demand when the economy slows down. You have yet another group of products that experience a quantity demanded that rises with the population, and the world wide population continues to rise, as it has since the beginning of time. Finally, with the Fed's rate cut, there will be a supply of relatively cheap money. If that does not cause a significant rise in inflation, cheap money will grease the economic skids and cause even more opportunities to open up. All these factors will converge to bolster and or insulate the markets for certain products and services, such as those that provide for basic needs, or help others ride out tough economic times.

As a business owner, employee or investor you must investigate what opportunities are opened by these conditions. For the business owner it means some markets will open to you, even as others slow down. If you can provide those things that can help others compete when their market gets tougher, that is one such opportunity. Look into the future now, before your business experiences a major downturn, find those markets and take advantage of them, while the opportunity exists. For you as a business owner, any products or services that help other businesses differentiate themselves from their competition will be in demand, as other business owners fear their market share is slipping away or slowing sales is cutting into their revenue. If you have a business that caters to the end user, look to any product or service that can help the consumer ride out tough economic times.

The important thing for both of these kind of opportunities is that you act now. You must position yourself to take advantage of them so you are the one who your customers look to as a solution in their time of need. That will help ensure it's not a time of need for you as well. A bit of planning now will help you to escape a plunge in your business.

If you are an employee, the time is now to ensure you are the most valuable employee in your organization. Sadly, if you work in some union shops, your value may not matter, as any layoffs will be done strictly on a seniority basis. For others, now is the time to buckle down, as your value to your employer will have a direct effect on two things; your likelihood of retain your job if the need arises for your employer to respond to a declining market, and the ultimate success of your organization in such a market. If you are positioned well in both of these areas, you stand the best chance of not only riding out a storm, but possibly rising to the top during the bad weather.

Take any extra training you can during this time to increase the value to your employer. Do special projects that can bring your employer extra market share or revenue. Find new and innovative ways to cut costs that will directly impact your employer's bottom line. All such moves can not only help your employer ride out any tough economic times, but help ensure you a key place in that organization for a long time to come. This may also be a great time to consider a side business to help bolster your personal revenue, if such opportunities exist (and they usually do). Just ensure that you can do this without impacting your job performance, as now is hardly the time to be perceived by your employer as withholding effort.

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The very lowest income earners fall into the lowest federal tax bracket. If that describes you, you can temper your disillusion with your low income with the fact that at least you'll probably be paying no federal income taxes for 2007. You may even be getting more money back than you paid in. A pretty nice deal, that. So much for those “Tax cuts for the wealthiest Americans”, not that they didn't see one.

For the rest of us, stuck somewhere in the middle, between the wealthiest Americans, and those that get back more than they paid in taxes, we will have to look at how much the IRS will demand from us in this yearly rite of homage to government finance. Where it gets really important is for those who fall right on the brink of jumping up to the next higher bracket. If this is you, you will have to pay the higher rate for all marginal income over the bracket cutoff. You do not have to pay the increased rate on your entire income for the year.

For example, a few years ago I got caught in this exact situation. I earned a hair over $59,000 that year, putting me in the 28% tax bracket. That does not mean that I had to pay 28% on all my income for federal tax purposes. I had to pay the 28% only on the income that was above the cut off for the lower bracket. That is why the IRS publishes tax tables, otherwise you could just apply the bracket percentage across the board. It would be a fairly simple calculation. I'd bet Turbo Tax, Quicken, and H&R Block would probably find far fewer customers if taxes were simplified.

The fact is that everything does get pretty complicated by the time you add in your deductions (which of my deductions are valid, anyway?), investment income, capital gains, and depreciated assets. If you are the sole proprietor of, or partner in a business, all bets are off. You best either find a good tax preparrer or get some tax software. You don't have the time to accurately do your taxes to ensure you are paying as little as possible.

Make sure that your income and your tax brackets line up such that you are not earning just enough to actually make less, after taxes. There are cases where a small increase in income can produce a smaller post tax income. That's why we have tax software and accountants. In the aforementioned case, you will want to see if you can find a few more deductions or defer any income to get your income down a bit.

To find out your federal tax bracket, download federal tax forms (or one of the myriad schedules the IRS delights in conjuring up), or e-file your tax forms, see the IRS web site here:
http://www.irs.gov/individuals/article/0,,id=118506,00.html

For the rest of us, we'll just take our grocery bag of forms, receipts and statements to our accountant and have them wade through it, in the hopes we won't have to write too large a check to Uncle Sam this year.

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Posted by debtblog at 02:41 PM | Permalink | Comments (0) | TrackBacks (0)

According to cost figures from a University of Kentucky study, you could build your own, private 67 mile long Interstate Highway. Maybe you'd like to do something a bit more charitable. You could buy 30 nice, new, 250 bed, suburban hospital facilities, and locate them in the communities of your choice. You like cars? Well, you could have one hell of a car collection with that much money. In fact you could pick up a couple of motorcycles too. That $9.07 billion would buy just about every vehicle produced by the Honda Motor Corp. for the first 3 quarters of 2007.

What are people spending so much money on? Well, betting on the Superbowl, of course. About $90.7 million was spent on legal betting on last year's Superbowl in Nevada sports books alone. By some estimates, this accounts for roughly 1% of all action seen on the game. Simple math reveals that people drop about $9.07 billion betting on the big game. Wow! How much of that is illegal gambling? The majority of it, although much of this illegal money changes hands in office pools throughout America, and is wagered by people who seldom bet on much else. Gambling has been legalized in many communities throughout the country. The benefit, or lack thereof, of such gaming is a subject for another discussion, however only Nevada has legalized sports betting.

Since Nevada's sports books raked in only $90.7 million, the remainder is illegal. I never knew there were so many crooks in this country. The FBI estimates there may be as much as (are you firmly seated?) $380 Billion bet on sports every year in this country alone. A 10% tax on that would take care of a few things, you can be sure. Cure for cancer anyone? Mars mission? Give it all away to cure poverty? Hold on, are you insane? Giving money away on a regular basis never cures poverty, it only makes people dependent, and in most cases, less likely to ever become self sufficient. Sadly, that huge amount of money would probably only swell state and federal coffers, get the government beneficiaries of such largess accustomed to sucking at yet one more teat, and eventually be frittered away, leaving precious little benefit for you and me.

Have a great weekend, and keep trying to get Debt Free.

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Posted by debtblog at 02:39 PM | Permalink | Comments (0) | TrackBacks (0)

Now, most investors know better than to count on hitting a home run every time they pick a new stock. More often investors seek to mitigate the risks of seeking the long ball by filling most of their portfolio with less risky investments. If they’ve done their homework, and the market cooperates, they’ll make out pretty well. The question is why look for the home run stock at all? The chances of picking one of those meteoric companies that can single-handedly fund your retirement is exceedingly slim. By the way has anyone ever noticed that meteors tend to go down? I don’t know where the term “meteoric rise” came from, but most likely it was from someone standing on their head.

What are your chances of landing that big, home run investment, so you can retire at 32 and drive your new GT2 merrily off into the sunset? Well, there are almost 4,000 different stocks listed on the OTCBB. Some are great companies to be sure, and are using the capital they raise from issuing shares traded there to fund their growth in the hopes that one day they’ll move to one of the larger exchanges. The problem is that there are so many risks inherent in trading such issues that most investors, even very aggressive ones, are better off leaving these alone. Your chances of finding the next Google, Microsoft or Intel among the OTC-BB or pink sheet companies is exceedingly unlikely.

In most cases companies with that much on the ball and that much investor support will simply IPO on one of the larger exchanges. None of the aforementioned companies were ever penny stocks, despite Internet rumors to the contrary. Google IPO’d at almost $100 per share and Microsoft, who raised an amazingly small $58.7 million from their $21/ share IPO in 1986, never came close to penny stock status. By the way, IPO underwriter Goldman Sachs collected a $541,000 fee from MSFT for their services. By the way, Microsoft never needed the IPO as financing. In 1986, they had cash reserves of approximately $38 million, but they’d given so many incentive stock options, they felt they’d soon have to register under SEC rules. Never liking to lose control of time or place, Bill decided to get a jump on the whole thing.

Lets take a look one small step up the stock hierarchy, micro cap stocks. Do you have a good chance of making hay there? The typical definition of a micro cap stock is one with a market cap of smaller than $250 million. I went a bit smaller, to companies with market caps with under $100 million on any of the three major exchanges. Surely the risk to investors there is less than on the OTC-BB or pink sheets, right? If nothing else they are subject to more oversight, and should (in theory) be less likely to experience major moves in stock price precipitated by surreptitious actions of either company insiders or Internet price manipulation schemes. There are about 565 stocks meeting the under $100 million figure.  Of these, an astonishing 478 are trading at 10% or more below their 52 week high. That is about 85%. Now this may not be too surprising, given that the market has dropped precipitously over the previous 6 months.

Taking a look at larger, more established firms, we find that there are 236 companies with a market cap between $10 billion and $25 billion, and that 192 of them meet the criteria of trading at 10% or more below their 52 week high. That is about 81%.

I found 217 companies with market caps of greater than $25 billion, but below $200 billion. How many of these companies are trading at greater than 10% below their 52 week high? About 165 of them, or 76%.

When looking at the really big players in the corporate world, those with market caps exceeding $200 billion. There are 12, a fairly small sample. 10 of them are trading at greater than 10% below their 52 week high and half are 15% below it.

What does it all mean? It looks like there is an positive correlation between a company’s market cap and their recent stock performance, until the very largest companies are reached, at which time the relationship goes bad. In different market and economic conditions this may not hold true of course.

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Posted by debtblog at 03:09 PM | Permalink | Comments (0) | TrackBacks (0)

Since it's online, you can access it from anywhere, giving a very convenient way to manage all aspects of your personal finances. You can see at an instant where all of you money is, and more importantly, where it's going. It's nice because you can do this from anywhere. If you are active, as so many of us seem to be these days, that is very nice. I know between work, business, and the kids, it seems like I'm in 20 different places every day. We've been using Quicken's business software in our businesses for years, and I know why it's the most popular small business accounting package. It looks like they've developed a similarly thorough and easy to use package for online use.

To help introduce Quicken Online, they're offering a 30-day free trial. You can get the free Quicken Online trial here. Another timely special offer is a $25.00 savings on a Quicken / Turbo Tax bundle. If you do your taxes yourself, or would like to start this year, this is just in time. You can get the special bundle savings offer here.

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Is it true? Does your credit score really give an accurate prediction of your overall level of general responsibility? What about those who were downsized and lost their jobs, subsequently causing their credit score to decline. Or someone who had excellent credit, but was injured through no fault of their own, lost their job and started falling behind on their bills? Well, thankfully for those who have questioned weather or not the insurance industry has any business using credit scores to help set insurance rates, the FTC has commissioned another of their many studies. This one deals with exactly that question.

Completed in the summer of 2007, the Federal Trade Commission, in concert with the Federal Reserve Board and the Department of Housing and Urban Development (HUD), have brought us a 242 page study on how the use of credit scores affects consumer's auto insurance rates. Does it artificially inflate rates, enabling the insurance companies to pocket millions more of your dollars? Does it let the industry unfairly discriminate against certain groups? We'll see.

First used by insurance companies to help set rates about 15 years ago, this practice has become almost universal among insurers. They love it. In fact, they are so in favor of the practice when setting rates for new customers, that in 2006 they spent $3.7 million in an attempt to defeat an Oregon ballot measure against it. Oregon had earlier banned the use of credit scores in revising rates for existing insurance company customers.

To help ascertain the fairness of the practice, the Feds examined the following areas according to the report:
1 - How credit-based insurance scores are developed and used; and, in the context of automobile insurance the relationship between scores and risk;

2 - Possible causes of the risk / credit score relationship, if any

3 - The effect of scores on the price and availability of insurance

4 - The impact of scores on racial and ethnic minority groups and on low-income groups

5 - Whether alternative scoring models are available that predict risk as well as current models and narrow the differences in scores among racial, ethnic, and other particular groups of consumers.

Seems like the study was fairly thorough, but what did it determine?

Finding 1 -”Credit-based insurance scores are effective predictors of risk under automobile policies. They are predictive of the number of claims consumers file and the total cost of those claims. The use of scores is therefore likely to make the price of insurance better match the risk of loss posed by the consumer. Thus, on average, higher-risk consumers will pay higher premiums and lower-risk consumers will pay lower premiums.”

Finding 2 - “Several alternative explanations for the source of the correlation between credit-based insurance scores and risk have been suggested. At this time, there is not sufficient evidence to judge which of these explanations, if any, is correct.”

Finding 3 - “Use of credit-based insurance scores may result in benefits for consumers. For example, scores permit insurance companies to evaluate risk with greater accuracy, which may make them more willing to offer insurance to higher-risk consumers for whom they would otherwise not be able to determine an appropriate premium. Scores also may make the process of granting and pricing insurance quicker and cheaper, cost savings that may be passed on to consumers in the form of lower premiums. However, little hard data was submitted or available to quantify the magnitude of these benefits to consumers.”

Finding 4 - “Credit-based insurance scores are distributed differently among racial and ethnic groups, and this difference is likely to have an effect on the insurance premiums that these groups pay, on average.

▪ Non-Hispanic whites and Asians are distributed relatively evenly over the range of scores, while African Americans and Hispanics are substantially overrepresented among consumers with the lowest scores (the scores associated with the highest predicted risk) and substantially underrepresented among those with the highest scores.

▪ With the use of scores for consumers whose information was included in the FTC’s database, the average predicted risk (as measured by the total cost of claims filed) for African Americans and Hispanics increased by 10% and 4.2%, respectively, while the average predicted risk for non-Hispanic whites and Asians decreased by 1.6% and 4.9%, respectively.”

Finding 5 - “Credit-based insurance scores appear to have little effect as a “proxy” for membership in racial and ethnic groups in decisions related to insurance.”

Finding 6 - “After trying a variety of approaches, the FTC was not able to develop an alternative credit-based insurance scoring model that would continue to predict risk effectively, yet decrease the differences in scores on average among racial and ethnic groups. This does not mean that a model could not be constructed that meets both of these objectives. It does strongly suggest, however, that there is no readily available scoring model that would do so.”

So, there you have it. According to this study, credit scores work, just as the insurance industry said they do. There may be other reasons for the correlation, but we are unsure as to what they are. The use of credit scores to help calculate auto insurance rates may actually benefit consumers, but how much can't be determined at this time. This practice does, in fact allow the insurance companies charge different rates to different ethnic groups. Are we to infer that, because the use of credit scores as a predictor of risk is accurate, that these different racial and ethnic groups actually present different levels of risk? Or, should the companies dig a bit deeper to determine what factors within the groups are responsible for the differences in risk profiles, instead of taking the easy way out? The study also found that the scores have little affect on the company's willingness to offer insurance to different racial and ethnic groups. And finally the FTC determined that, although there may be a suitable alternative to using credit scores to help assess risk profiles, they were unable to determine exactly what those might be.

Once again, your tax dollars have helped to answer a question asked by many. Is the use of your credit score to help set auto insurance rates fair? It seems that the answer is, for the most part, yes.

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Posted by debtblog at 02:45 PM | Permalink | Comments (0) | TrackBacks (0)

The problem is that for most people that have bad credit, credit cards were how they got there in the first place. Looking for a credit card if you used them to get your personal finances completely screwed up isn't going to make things any better. Too many people think that they can reverse the situation if only they can just get this one more card. Then, they'll turn things around, and everything will be okay. Only you and I know that in most cases, it won't be okay because the underlying causes of the problem still exist and until they are corrected, it's only going to be like giving a fifth of Jack to an alcoholic, who thinks “I'll just have one more and then I'll stop.”

In many cases it happens gradually. The problem is that few people actually track their finances, so they have little clue about exactly where the money goes, only that it's gone. To those that aren't financially savvy, use budgets, track their expenses, and go over their billing statements, it seems that one day they're simply blindsided. They wake up and realize they're in way over their head and have little hope of reversing the situation. If this sounds all to familiar, you're not alone. It can be a case of keeping up with the Joneses, being just a bit too social, gambling, or myriad other causes of excessive spending.

There are times when people with bad credit may need a credit card and it's not a bad idea. You may fall into one of these categories. If you had one time, extraordinary expenses or income loss that put you over the edge, such as job loss or medical bills, you may fall into this category. These experiences can destroy the credit of someone who previously was a prime credit risk. These people tend toward the financially responsible, but just got into a bad situation. In this day and age, living completely sans credit card can be a difficult proposition especially if you travel or purchase things on line (another addiction that can get you in trouble in a hurry).

You can use a credit card to help reestablish good credit, but it's essential that you've done all the groundwork first. Job 1 is to reign in your spending. If you're still spending more than you make, getting a new credit card is the last thing you need to be doing. Pay off any outstanding debts on existing cards, if you have any. If you have existing credit cards, don't get new ones. Just pay off the ones you have and lock all but one of them away somewhere. Keep the accounts open, because those aged accounts, and the availability of more credit, will help improve your credit score over time. This strategy will only raise your credit score back up if the accounts are in good standing and have low or no balances. Maxed out, or close to the limit cards will detract from your credit score.

You should only use new credit cards to help reestablish your credit if you have lost all your previous credit cards. In that case, you'll need to have some type of credit account to begin a successful track record of making timely payments. Two of the things that the FICO scoring system looks at is how much credit you have, and your credit profile. You want to have a balanced mix of credit types, such as personal loans, revolving credit (credit cards are a type of revolving credit), and mortgages.

The Three Types of Credit Cards for People With Bad Credit
Here's what to look for if you must have a credit card and your credit is not so hot. You'll have 3 basic choices; secured, unsecured or prepaid cards. Secured credit cards, as the name suggests, require some security against the the possible credit limit, limiting the lender's exposure to risk. This enables those with bad credit to qualify for credit cards they'd otherwise not have a prayer of getting. Typically the security is cash, the amount of which determines the credit limit for the new card. You'll usually be charged a fee for the privilege of having such a card.

One of your key tasks is to shop around for the best fee structure. Fees are one of the card issuer's main profit centers. Many people fixate on the interest rates they're paying and forget about the fees, which can be substantial. Make sure you check both. In addition, make sure that the card issuer reports your activity to Exeprian, Trans Union and Equifax, not just one or two of them. If you're using the card to rebuild sour credit, you want to get what you're paying for (and you are paying).

If you do well with this secured card, in time your card company will offer you a real, unsecured credit card. At first you'll probably have to live with higher interest rates, but make sure you inquire about lowering your interest rates. They may say “no” at first, but ask again every 3 to 6 months. As your credit improves, you'll qualify for better rates. If not from them, you'll be able to get a card from another company. Just don't start on the same death spiral that got you in such a mess in the first place.

Your other option is a prepaid credit card, typically either a Visa or MasterCard. These are really just a glorified debit card. With a pre-paid card, you deposit money into an account for security as with a secured card. The difference is that as you spend, it just depletes the money you deposited. With the secured card, you are actually using credit. The security money is just there in the case of a problem.

Have a great, Debt Free Weekend!

GO COUGS - #4 (15-0)

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Posted by debtblog at 11:15 PM | Permalink | Comments (0) | TrackBacks (0)

If you are looking to make the leap into home ownership, and are a bit savings challenged, here are a few down payment assistance solutions you can look into. It might be just what you need to finally get a house of your own.

For all you home sellers out there, just dying on the vine because your house hasn't sold, especially if you bought a new house before you sold your old one, these could be a tool you can use to help market your house. It might be the one thing that helps you get out from under that old house and all its expenses.

Get Downpayment Assistance From a Charity
No, I don't mean call up the Red Cross or the American Cancer Society and ask them for a handout. It works more like this; a 501(c)(3) non profit organization or charity gets a contribution for the amount of the down payment, which they then transfer to the seller. The contributor gets a tax deduction for the contribution and the charity pockets a service fee. You get your down payment. What a deal! No doubt.

As with anything that seems too good to be true, there are some problems with the arrangement, namely for the IRS, who hates to let some good tax dollars go to waste. In 2006 they published a notice with the intent of removing the tax exempt status of 501 (3)(c)s who's primary activity was to move money from sellers to buyers in order to facilitate real estate transactions. Shortly thereafter HUD followed suit, releasing a proposed rule that would forbid the use of this process for the purchase of FHA properties.

Ah, but not so fast! The HUD rule only states that if you use an FHA loan, you cannot use down payment assistance if seller financed organizations are the source of the money. You can still use this method if you are not using a FHA financing or if you use a non profit, or charity organization who's chief function does not entail financing down payments using money from sellers.

In addition, in October of last year, the DC U.S. District Court denied HUD from prohibiting the seller financed transactions until such time as they can further review HUD's rationale for their decision. The Court basically said they felt HUD didn't do their due diligence before issuing they made the ruling. One important note here. One of the reasons HUD made their ruling in the first place is that in their opinion, such financial sorcery artificially inflates the selling price of the home, costing the buyers money. This is due to the seller passing along the service fee charged by the charity for the transaction.

That may be true, but numerous organizations in the home buying process pass along fees to one or more of the parties involved. At least it allows people to actually buy a house when they could have otherwise not done so. The problems arise when people buy a house they can not afford, because they have no down payment requirement and they get a mortgage based upon shaky financials (probably not going to happen so much anymore).

The National Association of Realtors is pushing for a 0 down FHA program to be implemented. Their reasoning is that eliminating the down payment requirement will remove the incentive for these assistance organizations. That may be true for homes bought using FHA loans, but what about all the rest? As house prices rise, the problem of obtaining sufficient funds for a down payment is only going to be exacerbated. Thankfully for buyers, they are experiencing a temporary reprieve, as real estate values have declined in many markets. In the long term however, this pricing trend will inevitably reverse itself. Even so, the prospect of a recent college graduate, new to the workforce, plunking down the down payment for a new home can be a bit laughable, when you consider the price of homes in many major cities.

Even at 3%, this can add up, depending on where you land your first job. For example, the average home price (preliminary Q3, 2007) in Indianapolis, Houston, and Omaha was between $125K and $155K. The average college graduate or young family may be able to come up with the $6,000 they'd need to get into a home after all was figured in. However, if you find yourself in Seattle, Boston or Washington DC, you'll find the going a bit tougher, with homes fetching around $415K.

If you've come to the sun of SO Cal, forget it. To get the average priced home in Orange County you'll need $700K, one in L.A. will cost an average of $588K(that factors in the many really bad L.A. neighborhoods, so a nice house will cost more than you'd think), and San Diego brings $589K. Not only can you not even get an FHA loan that big, if you could, you'd need to have almost $20Gs stuffed in a bag, an amount few recent college graduates, or any other workers with young families have a prayer of getting.

Get Downpayment Assistance From the Government
Speaking of Southern California, the Golden State is one of the states that has an Austrian born Governor...wait, wrong post, I mean a state guaranteed, no down payment program for home buyers. California's is known appropriately enough, as the California Homebuyer's Downpayment Assistance Program (CHDAP). As with many such assistance programs, they work by combining an FHA loan and a “silent” second mortgage. Given the state's relative dearth of homes that could possibly qualify for FHA financing, especially in the major metro areas, one might ask about the relevance of such a program, but something is better than nothing. If you live in California, or may be relocating there soon, you can find out more about their program at the California Housing Financing Agency's website.

Washington State has a similar program fro down payment assistance if you are disabled or have a disabled person living with you. It is termed the HomeChoice Second Mortgage Program. One wonders how much money states might save if they stopped hiring marketing consultants to come up with catchy names for state programs. In any case, to learn more about Washington states program, visit the Washington State Housing Finance Commission's website.

Arkansas, a state who's had 2 of the current Presidential candidates reside in it's Governor's Mansion (triple-wide) has such a program too. Theirs is targeted at first time home buyers and is offered by the Arkansas State Development Finance Authority in cooperation with a Federal program, the American Dream Downpayment Initiative (In this case, the Feds hired the marketing consultants), which was originally signed into law by President Bush in 2003. Arkansas' down payment assistance program provides downpayment and closing cost assistance for low income families making 80% or less of the area's median income. See it at the Arkansas Development Finance Authority's web page.

To find out more about the Federal DPA program, check out the American Dream Initiative website.

There you'll find about each state's program that ties in with the ADI. However, many other states have other programs that are not affiliated with the federal program, so take the time to visit your state's housing, and/or finance authority or agency website to find out how to qualify.

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Posted by debtblog at 02:44 PM | Permalink | Comments (0) | TrackBacks (0)