RSS FeedFinance in the News: Financial Failures of September, 2008
The month of September 2008 has seen dramatic and sometimes shocking upheavals in the United States economy that have had profound effects on the economies of other countries across the world. These upheavals include the failure of the United States’ largest savings bank and the federal bailout of a major American insurance corporation. What follows is a short summary outlining 3 of the most major of these:
- Lehman Brothers Holdings Inc. – A global financial services firm that deals in investment banking, fixed income and equity sales, trading and research, private banking and equity, and investment management, and one of the primary dealers in the United States Treasury securities market, Lehman Brothers filed for Chapter 11 bankruptcy on September 15th, 2008, marking the largest bankruptcy filing in United States history with a record $613 billion dollars of debt.
- American International Group, Inc. – AIG, a major American insurance corporation based in New York City, with headquarters located across the globe, suffered a massive liquidity crisis on September 16th, 2008 due to the downgrade of its credit rating. This prompted AIG to request a loan from the United States Federal Reserve (the Fed) to prevent the company’s complete collapse, which the Fed granted, marking the largest bailout the government has made of a private company in history (though smaller than the takeovers of Fannie Mae and Freddie Mac a week previous, it was not the same kind of deal).
- Washington Mutual – The largest savings and loan in the United States, Washington Mutual, was seized by federal regulators on September 25th, 2008, and an emergency sale was brokered to JP Morgan Chase for virtually all of WaMu. The remainder will be operated by the United States government. This is by far the largest bank failure in United States history, and while some shareholders and bondholders will be wiped out, the average customer is protected up to $100,000 by the FDIC.
These are just three of the large failures experienced during the month of September in this economic crisis, and it is important to note that AIG was bailed out by the government because it was so intricately entangled with the rest of the financial system of the US, whereas WaMu and Lehman Brothers were allowed to collapse because the ramifications of that collapse more affected those involved with these private companies than it would the fate of the financial system as a whole.
Managing Your Child’s College Finances
None of us want to see our child, or ourselves, accumulate mounds of debt from college. At the same time we want our children (or grandchildren) to obtain the best education, and have a positive college experience. Do not make the mistake of risking your financial stability for education when you don’t have to.
Don’t wait until the last minute to start saving for college. College isn’t cheap today. Have you considered what it will be when your child or children finally start? Experts suggest that the annual tuition for public schools will be a whopping $35,000 in 2017. if you want to send your child to an Ivy League school, be prepared to shell out $86,000. The idea of saving now is started sound a little better? Unfortunately less than half the parents that plan to help pay for college have even begun to save. Start the process now.
A 529 college savings plan is perfect for saving for your child’s college education. Most states allow for a tax deduction for moneys put into a 529 and it grows tax free if it’s used for college loans. It is portable and can be used at and qualifying higher learning institution in the US. These plans are also in your name so they do not affect the child’s changes for receiving financial aid. There are several websites that can provide more information on 529 plans.
Most of us can’t actually afford to cover the cost of our child’s education out of our pocket. Try to find a middle ground between your pocketbook and planning to apply to for need based aid. Paying for the college tuition, books, living expenses, and other needs is going to be very overwhelming. Remember that financial aid is based on your families income and assets, the cost of school, and if you do or don’t have other children in college. Be sure to consider everything and don’t count on aid kicking in as much as you might like it to.
Don’t just go haywire with college spending. Budget the money and involve your son or daughter in this process. After mailing tuition payments, covering a credit card, writing checks here and there, you’re going to have a major investment before you realize it. By sitting and down an creating a budget… and sticking to it, you are ensuring that there won’t be and financial bumps along the road. Financial planners are available to help with college planning, and you can usually find planner that specialize in college preparation and budgeting. You can conduct a quick internet search for more information on what you can and can’t afford and how to make it work for your family’s situation.
Understanding a Money Market Account
Money market accounts and money market funds are not the same thing. To understand the difference between both of them, it is best to start at understanding “money market”. Money Market is basically a generic term used to describe the market that banks and other financial establishments lend, borrow and trade money, Certificates of Deposit and other items.
The Money Market Account is basically a premium account, like a high interest savings account. Money Market Accounts are commonly just called an MMA. This Money Market Account shouldn’t be confused with the Money Market Fund. The Money Market Fund is basically an investment strategy that yields larger returns than a premium savings account. A Money market Account (MMA) can be opened very simply at just about any bank. The money kept in a Money Market Account will be invested, but the bank or financial institution does the investing and collects on the returns as well.
The money you invest in an MMA is usually placed into an investment like a CD or Certificate of Deposit, Treasury bill, or other safe financial instrument. These are all lower risk, short term investments. What is your benefit from allowing the financial institution to use your money? You benefit by receiving a premium interest rate that can occasionally be twice as high as a regular passbook account.
Like any other account with a bank, a Money Market Account from the bank is also insured by the FDIC (Federal Deposit Insurance Corporation) for up to one hundred thousand dollars. While you can find what seems like a better deal on a Money Market Account offered from a bigger corporation, keep in mind that the FDIC doesn’t insure those account as they do at a bank. If that corporation happens to file bankruptcy, your money is long gone.
Although Money Market Accounts have a decent lower risk investment, you might want to remember that because it is an investment, there are some restrictions. Your money is less liquid that it would be in a regular savings account. Also, Money Market Accounts usually require both a minimum deposit as well as a maintained minimum balance. Interestingly enough, although you are able to make withdrawals from your Money market Account, there is a limit to how many you can make in a month’s time frame. You also can’t withdraw an amount, or combination of amount that would cause the balance in the Money Market Account to fall below the minimum. If you do, there are usually penalties.
How to Eat Well on a Shoestring Budget
With the prices of everything going up, it has become harder to pay bills, and still be able to afford to put food on the table for your family. It’s too easy to run out for fast food every time you have money available. When that happens, there is usually a bill somewhere that doesn’t get paid on time because you have just spent the money to eat out. There are ways to eat well, even if you are holding tightly to a shoestring budget.
Begin with meal planning. This is the best way to stay organized, and not have to decide every night what dinner will be. If you have done this correctly, you will have meals planned for 7 days. These will include breakfast, lunch, dinner, and snacks. There are even websites which show you how to feed a family of 4 from $45 – $70 a week. These are well balanced meals, too, not just all beans and rice. You may be able to afford more than that each week. Once you have figured out your weekly food budget, sit down and plan your meals.
Shopping is the next on your agenda. It is very important to have a list prepared so that you are not tempted to just grab things off the shelf. Discipline yourself to buy only what is on your list. If necessary, do the shopping trip alone, so you are not tempted to give in to requests for food you don’t need, or isn’t on your list.
Coupon clipping is not just for your mother and grandmother. This is a money saving tool that comes in handy, even today, if you do it wisely. When coupons are available to you, first select any that apply to something you already buy. Once those are put aside, you can go through some of the ones which might make a nice “treat” for the family. If the savings is high enough, you can add that to your shopping list. It’s always fun to see just how much you have saved by using coupons when you reach the checkout counter.
After following a good meal plan and food budget, you may find that you have saved enough money for a meal out for the family once or twice a month. As you get better at it, this could even be a once a week treat. You will be very surprised just how well you can eat with a little effort and planning.
Mac Users Get Scammed, Too
There’s no question that the Internet is a great tool and a modern marvel. It’s made our lives much more convenient and given us the means to broaden our horizons personally, culturally and financially. But as with anything, there are pitfalls that can cause you a lot of trouble if you aren’t aware of how to avoid them.
Falling prey to online scams can, at the very least, render your computer nothing more than an expensive doorstop and at the very worst ruin your personal finances completely. A virus can ruin your hard drive, and identity theft can ruin your bank balance.
There is a popular belief floating around out there that Mac users are not susceptible to online threats, and that PC owners are the ones that really have to worry. This is only partly true. PC owners do have to worry, of course, but Mac users are definitely not immune to the dangers out there on the Internet. For example, studies have shown that Mac users fall prey to phishing scams at around the same rate PC users do. This is because Apple’s browser, Safari, has no phishing protection built in like major PC browsers do.
What’s more, since Mac users are often under the mistaken impression that they don’t need to worry about this stuff, they often do not take it upon themselves to acquire additional software that would protect them from phishing, other scams, and viruses. You still need to take care to never open attachments from people you don’t know, and certainly never give out banking information through email. Your financial institution is never going to email you to ask for your password to “check records,” or anything similar. If you get an email like that, you can safely assume it’s a threat and delete it immediately.
Until Safari’s security features catch up with those of the PC, you may consider using an alternate browser like Opera or Firefox, which offer more protection. If you are a Mac owner, never assume that your Mac is safe just by virtue of being a Mac. Doing so can put your financial health at major risk, not to mention your computer’s health, so keep a careful eye on what you and your family do online to protect yourself, and the Internet will remain a modern marvel instead of a costly monster wreaking havoc on your bank account.
Get Some Cash with a Garage Sale
Want some extra cash for that boat that you’ve been driving past every time you go into town? Maybe you have your heart set on a band that is going to be doing a concert in your neighboring larger city. What is a fast easy way to get the cash you need to do the things you want? A garage sale! What better way to make some quick money than to have a garage sale. After all, it also cleans out all those things that you don’t use any longer. Garage sales, regardless of your location, have a strong following. People will plan out a full weekend of garage selling. So, know that, if done correctly, you will have customers. A garage sale is also a lot of fun and can bring family and friends together.
Decide where you are going to have the sale. You want a location that is easily accessed. There is nothing worse to a garage sale customer than searching in and out for your location, and then finding that there isn’t anything they are interested in. Stay close to main roads, and make sure that it is a location that allows for easy directions on paper and on the phone.
Now, decide on the items that you are going to be offering in the sale. Go through all of your clothing that you no longer wear, shoes and accessories, furniture, the garage, attic, backyard, and even your office at work. Another great suggestion is to call up other family members and friends to see if they would like to get rid of some things, or if, perhaps, they would like to take part in the garage sale.
Make sure you do plenty of advertising. Take out an ad in the local papers. This should be the news paper as well as shopping papers that allow personal ads. Most of the papers will have a section dedicated to garage sales. Also, search online for sites that allow you to list garage sales. As the market for garage sells continues, it is managing to find its way to the online community.
Lastly, be prepared to have change as most people will be handing you ten and twenty dollar bills. Be prepared for this. Have your space laid out to both look pleasing and full from the road as well as to have a nice easy flow for those walking around the sale.
Understanding Different Types of Savings Accounts
Not all savings accounts serve the same purpose. In that same token, not all savings accounts are setup to cost the same to the account holder. Banks have come a long way, and have developed several types of accounts for their customers. Before you decide what account is best for you, you will want to have an understanding of the basic differences of savings accounts.
A lot of savings accounts will get your attention with flashy amazing interest rates, but that doesn’t mean that the account will continue to offer you what you are looking for in your savings account. Following is a look at a few basic savings account types to help you at least to be more prepared to ask appropriate questions to your banker when you are ready to open your next savings account.
How often are you going to putting money into the account? Is this account going to be receiving deposits on a monthly basis, or just here and there? Some accounts require you to pay a minimum amount each month. Some allow you to remove money whenever you want, and others, not at all until a certain amount of time has taken place. There are 401K’s where you can put a maximum amount away each year, and ideally not access it.
How often are you going to take money out? You can get a great rate of interest, but not usually if you plan to have your hands in it all the time. Can you do this? If you want to have access at any time you will probably have to settle for a lower rate of interest.
What will get out of the account? If you can put money in and not touch it, then a 401K is a great choice because you can get a great rate and get tax free interest as well. A regular savings account will reward you for putting money into the account each month, and standard accounts give you flexibility by letting you start with low amounts, and pay in and withdraw cash whenever you want.
Although, you can’t usually get a fixed interest rate forever, you can get a good rate and usually fix it for up to a year. This gives you a reason to get as much into it in the beginning as possible. These accounts usually limit the amount that you can put into them every month. Ideally, you want to find an account that has no limits, and a high fixed rate or longest term for that rate.
How can I start investing my money?
Investing early on in life is an excellent idea even if you don’t have a great deal of spare money lying around. Small investments now can literally turn into big cash over a stretched period of time especially if you take the necessary precautions to insure your strategy is rock-solid and designed to offer maximum return as the years go by.
When it comes to investing the secret is to start at an early age. Most beginner investors want to know exactly how much money is required to start investing and become somewhat surprised to learn that the amount can be as little as $100 per month. Where to start depends on each individual but perhaps a good alternative, especially if don’t have much to start off with, might be to take a look at mutual funds. There are many different mutual funds to choose from although you will have to do some research to discover one that suites your individual needs. The internet is the perfect place to start since there are literally thousands of sites completely dedicated to helping beginners get to grips with investing in mutual funds. If what you are interested in is stocks, you might want to take a look at online brokerage services. Accounts are normally free with trading fees and commissions averaging around $7 per trade. This alternative gives you total control over your investments while also providing you with a convenient solution that can be accessed from the convert of your home. Saving money to apply on a savings account or invest in a retirement plan is also an investment and an exceptional one if acquired at an early age. This might not be the most exiting alternative but the benefits you will reap when the time comes to retire are remarkable especially since there are no risks associated. Your money will grow no matter what.
Investing is all about self control and knowing how to minimize overheads. Cutting down on superfluous expenses, paying off debt and reducing fixed monthly bills are some of the fasted ways to save money. Your main objective should be to maximize investments so that when the time comes to take things easy, you will have a nice nest egg in which to rely on. In conclusion, remember that every little crumb counts towards reaching your ultimate goal, so think clear of how you spend of your money.
Saving Money When Going Back To School
There are definitely some costs involved in going back to school. Whether you are a college student, a parent of one child, or a parent of six children, you all have to face the costs, and effort of going back to school. There are school supplies that need to be purchased. School clothes are usually on the list regardless of your age. If you are attending college, be prepared to shell out big bucks for school books. If you are a mother of teenagers, be ready for all the latest in fashion, from manicures, hair cuts, hottest and usually expensive hair care products, and only the coolest accessories. While some of these costs are completely avoidable, others are not. The ones that are, like hot haircuts and cool accessories, don’t have to be as expensive as they usually are.
First of all if you are a college student, forget tuition! The price of books, alone, is enough to make you choke! Here is some great advice. Once you get registered for your classes, take your schedule to the bookstore at your campus. The bookstore can provide you with a list of all the required, as well as suggested books, available for your course. If the list doesn’t come with the book number, you can ask for that as well. With this information, you are able to go home and visit online sites that offer school books from other users at discounted prices.
When it comes to paying for school supplies, be ready to load your shopping cart down. But here is a tip. After you get your list, before going to the store, pull out all of your arts and crafts at home, along with your child’s school supplies from the previous year. You would be surprised with how little you will have to buy after you gather what you already have. What you do have to buy, make a visit the dollar store first. Then, try some of the larger stores.
All kids are going to want to look cool for school. First of all, take advantage of tax free weekends for both supplies and clothing. After that, make a day of “primping” for school. Take your kids to the salon for new hair cuts. Don’t go to the high end salons. Just a regular shampoo and cut is fine. While there, mention to the stylist that you are going to let the children color their hair, and ask for recommendations. Most stylists don’t mind suggesting store bought products. Be careful, and only do this if you’re comfortable with it. Also, run by the store and let your girls get manicures together. Make a party of it to include hair, nails, and face masks. It saves tons on going to get everything done by a professional, and can really help your kids and you bond before school starts.
Prevent Your Rent from Increasing
It is not uncommon for a tenants rent to increase by a certain percentage at the end of their lease. Whether you signed a six month lease or even an 18 month lease, rent will usually go up by the end of the lease. More often upon a six month leases’ end, rent will go up less than at the end of an 18 month lease. This isn’t always true, but it is common. If a tenant requests to remain a tenant on a month to month basis, this usually ends up being an even higher monthly increase. There are, however, a few things you can do that might gain you a different outcome. Usually, A++ tenants are hard to come by. If a landlord manages to get a perfect tenant in his property, he will usually bend over backwards to keep them. There have been occasions where a tenant actually goes month to month for several months with no rental increase at all. This is because the landlord was so satisfied with his tenant that he hoped to keep them longer by not increasing rent.
So, what are some of the ways to gain A++ status with your landlord? The first is so simple: pay your rent in advance. Pay at least one to one and a half weeks in advance. This will automatically make you stick out in the landlords mind. You would be surprised how much trouble a landlord goes through to collect rent.
Do repairs for free. They don’t have to be major repairs, but every time a tenant calls the landlord about a leaky faucet, the landlord usually has to pay large amounts to get a repair man out there, unless he covers it himself. Fixing a leaky faucet is simple. If you do fix a lead, replace a door hinge, spackle a hole in the wall, or any other small repair, send a friendly note with your payment. Be sure to include a smiley face, and never ask for compensation.
When you do small projects like these, don’t forget to send it in a note. Ask the landlord, on occasion, if there are some small projects that he would like help with. Ask him if he would like to get paint, so you can do the painting for him. If he has the lawn taken care of, surprise him, and let him know that does not have to pay for this month’s lawn care service, because it was a autumn day, and you took care of it for him.
By the time your lease is up, this landlord will be ready to do what it takes to keep you in the property. While this is not a guaranteed method of keeping your rent low, it sure helps, gives you a great reference, and definitely makes you feel warm and fuzzy inside.