Wednesday, December 30, 2009

Free Credit Report Dot Com: Great Commercials, Bad Advice!

You’ve probably seen the television commercials and had the infectious jingle playing through your head for days. We are serenaded by the words, “Free Credit Report Dot Com!” sung by a guitar-playing trio to their television audience.

The musical threesome that star in these commercials find themselves in a multitude of predicaments – dressed as pirates working in a low-paying tourist restaurant, driving a nearly-defunct ‘junker’ off of a used car lot, or flailing wildly on a rollercoaster ride.

And what is the reason for all of their mishaps and misfortunes? Listening closely to the lyrics of the catchy tunes, we learn their troubles have one simple cause: they haven’t reviewed their credit report.
Each of us should access and review our credit report regularly. The consequences of ignoring our credit report may not be the comical situations portrayed in television commercials, but there are consequences nonetheless.

A credit report is a detailed report of your history with credit, and it is a primary source of information used by creditors to determine whether you’ll be given a loan, or what interest rate you will qualify for. It is also a tool to detect if you’ve been the victim of identity theft or fraud.

The overall message of the commercials is sound – it’s a good idea to get acquainted with our credit report. However, while the television jingle touts a ‘free credit report’, it is far from free. When you visit their website you will learn about a monthly credit monitoring service you will be subscribed to after signing up for the ‘free’ service.

While some companies charge for this service – and obviously, business is going well judging by the amount they can spend on catchy television jingles – there is no reason to pay for your credit report.

In 2003, Congress passed the Fair and Accurate Credit Transactions (FACT) Act that provides consumers one credit report from each of the three credit reporting companies every twelve months at no cost.
Accessing your free credit report at no cost has been made easy by visiting the website: or calling 1-877-322-8228.

Take advantage of this free service and get acquainted with your credit report. And next time you hear the commercial with the catchy “Free Credit Report Dot Com” jingle, just sing along – but don’t follow their advice!

Friday, December 18, 2009

read the fine print on credit cards

An ad in a New York paper encourages consumers to call for a preapproved credit card...the interest is 79.9%. Much ado was made a few months ago when President Obama came to the aid of a woman who had been charged exorbanent penalities when a University charged tuition to her credit card which was over its limit.

The bloated APR being chardged by the First Premier Bank comes following the recent legislation which limits caps to fees banks can charge to 25% of a card's credit limit. A recent mailing for a preapprded First Premier card lowers fees to just that limit...$75 in the first year for a credit line of $300. The new law doesn't set a cap on the interest rates credit card companies can charge. Hence this particilar card is charging 79.9% interest. These terms are totally unbelievable.

We need to read the fine print. We've been getting new information about our accounts as banks prepared themselves for how they would be conducting business starting in February when the new regulations take effect.

Thursday, December 3, 2009

Ratings of Insurance Providers

We often hear that we should check the ratings of insurance companies when considering insurance. Mainly this is to assess their financial stability -- several companies are well known for their ratings, such as AM Best. I was asked the other day in a class about ratings for insurance companies on other areas, mainly customer service. A couple sources I know of go beyond just financial stability and get into things like prompt payouts, customer service and general satisfaction.

The first is JD Power, Their website is easy to navigate and has some easy to use ratings for different types of insurance companies.

The other is Epinions, or On this website actual customers write about their experiences with a particular company. It is more random than JD Power, but the insight gives direct comments on companies.

Wednesday, December 2, 2009

Funds available to Wyo. residents to install renewable energy systems on homes

CHEYENNE – The Wyoming State Energy Office (SEO) is using over $2.2 million in federal funding to launch a program that will help homeowners defray the cost of installing renewable energy systems.

The funding is part of the $3.1 billion American Recovery and Reinvestment Act (ARRA) appropriation to the U.S. Department of Energy to fund state programs that prioritize energy savings, increase the use of renewable energy, and create or retain jobs.

Wyoming homeowners may apply to the SEO for grants of up to $10,000 or 50 percent of project costs, whichever is less, for installing photovoltaic (solar), small wind, and ground source heat energy systems at their homes. Grant awards are based on project size, will be allocated on a first-come basis, and are not retroactive for systems already installed or under contract to be installed.

“This round of federal funding will expand the state’s already successful photovoltaic program, giving residents more than one way to implement a renewable energy system at their home,” said Shannon Stanfill, SEO program manager. “Additionally, residents who install one of these systems may apply for a 30 percent tax credit from the federal government, bringing further savings at tax time.”

Provisions for each renewable energy system include:

  • Ground source heat installations: Grant reimbursements are $2,000 per ton (the measure of the output of a heating or cooling system equaling 12,000 BTU) with a maximum of 5.5 tons in a closed loop vertical or horizontal system. Ground source heat installations must be replacements for other residential heating and cooling systems.

  • Small wind generation and photovoltaic (solar panel and components) installations: Residents may apply for grants of up to $2,000 for every installed kilowatt (kW) up to a maximum of 5kW ($10,000). Grant reimbursements are calculated once the award recipient sends documentation of the installed kW amount to the SEO. No name plate installation of 20kW or above will be allowed. Solar panel components without solar panel installations, such as batteries, are eligible for reimbursement of 50 percent or up to $2,000 whichever is less. A maximum of 20kW for installations applies.

Applications are available Dec. 1 and may be downloaded at Applications may be electronically submitted, or mailed to: Wyoming State Energy Office, 214 W. 15th St., Cheyenne, WY, 82002.

Residents may apply for multiple grants, but only one grant application per renewable energy category is allowed. Applicants may not enter into any contracts using or committing these funds until after a grant award is made and a grant agreement is signed by all parties.

For questions regarding the program, please contact the State Energy Office toll-free at 1.888. 232.5390.

The mission of the Wyoming Business Council is to facilitate the economic growth of Wyoming. For more information, please visit

Tuesday, December 1, 2009

Holiday Spending

It's that time of year again. December is in, your Thanksgiving leftovers are out and the holiday madness has fully commenced. If you are one of the lucky ones, your Christmas shopping is almost complete. If, however, you are like me and many other Americans, you are facing a month full of expenses with very little of it tackled. What to do?

The good people over at MSN Money have written an article that will help you navigate the holidays without completely busting your budget. "10 Holiday Money Mistakes" outlines ten of the biggest mistakes made by consumers each holiday season while giving readers ideas on how to avoid those mistakes this year. The article can be found at:

Tuesday, October 20, 2009

Great article at MSN Money

I just found a great article today on MSN Money that I thought I would share. It is titled "4 Recession Regrets--And How to Fix Them." During hard times it is easy to kick yourself for money mistakes you might have made. This article gives some great advice on how you might atone for those mistakes. Just a warning: if you are expecting a miraculous quick fix, you will be disappointed. These are solid tips to help keep you from making the same mistakes in the future. So enjoy the article!

It can be found at:

Saturday, October 17, 2009

grocery shopping

I made a visit to the grocery store this afternoon. Perhaps because it's off season here in Jackson, I seemed to know someone in every isle. I happened upon a couple having a discussion about the cost of a name brand item and a store bought item. When they spotted me, I was asked " do you know if there's any difference between this store brand item and the name brand item, other than cost?"

It's been a few years since I taught Supermarket Strategies, a class I use to love to teach. I recalled several occassions I've had the opportuntiy to tour food processing plants in my travels and have seen first hand the same product being put into different containers with various company names. Sugar is sugar, salt is salt regardless of the label on the container. I was particularly amazed to observe that the Tobassco Sauce we all love is manufactured at Avery Island in Louisianna and the same company puts the same sauce into bottles for just about every country in the world under just about as many labels.

I thought our blog readers might enjoy seeing what the Consumer Reports found the difference between name brands and generics to be... here's the link.

The saying a penny saved is a penny earned is a fact which can add up to dollars if consumers are mindful of which product they select from the shelves at the grocery store

Friday, October 16, 2009

Kids and School Shopping: Hit the books, NOT your wallets!

With the lazy days of long over in most of Wyoming and the flurry of fall activities filling our calendars, we may notice a change in the stress level of parents and students across the state. Often, high-cost school supplies, activity fees, clothes, and other must-haves for kids can add a major stressor to family life.

To help the keep spending within limits and teach important life lessons for the school year and beyond, here are some strategies to help your students hit the books, but not your wallets, this school year.

1. Get the kids involved in planning when they have “wants” or “needs” on the shopping list. Have your technology-savvy kids search on-line for best prices, map the routes between stores for your next shopping excursion, and create a budget spreadsheet to track their spending.

2. Share the budgeted amount you can afford for the semester or school year on clothes, supplies, and extra-curricular events, and enlist their help in choosing how the money should be spent. Your kids will likely have to make some hard choices and a few things may fall by the wayside, but the valuable lessons they learn will be much more important in the long-term.

3. Also give them an opportunity to develop creative solutions to their budget shortfalls like selling outgrown but usable clothing, furnishings, or toys at a consignment store or on-line at eBay or Craigslist.

4. Long after the school-year is underway, stores often offer deep discounts on supplies and clothing to make room for merchandise for the fast-approaching holiday season. You can capitalize on some mid-semester school shopping with deep discounts. By then, your kids have a better idea of what they want after seeing the popular trends during the initial weeks or months of the school year.

The hopeful result:

Parents will spend less, and kids will better understand the reasoning when you say "yes" or "no” to their purchases. You will give them practice shopping for bargains, prioritizing their wants, planning ahead, and sticking to a budget ... and those are some important lessons that will live long after their school days are through.

Monday, October 12, 2009

Make Use of Tax-Credit House Repairs

Thinking about making some home improvements? Don’t let federal stimulus money go to waste! Until December 31, 2010, homeowners can take advantage of a national tax credit of 30 percent of the cost, up to $1,500, on a variety of energy-saving products. Insulation, windows and doors, roofing, heating, ventilating and air-conditioning systems, tankless water heaters and alternative energy programs, such as solar panels and wind turbines, are covered.

Improvements made in 2009 will be claimed on your 2009 taxes (filed by April 15, 2010) — use IRS Tax Form 5695 (2009 version) — it will be available late 2009 or early 2010. Some improvements are eligible until 2016. The has more information. But I'd recommend talking with your tax professional for details on what specific improvements may qualify and the information you'll need to keep (the receipt is an obvious thing, but other information is needed too). As the energystar website makes clear, not all energystar rated products are eligible for the credit.

Finally remember that a tax credit is a dollar-for-dollar reduction in your taxes -- pure money.

Tuesday, September 29, 2009

Save money - buy spices & herbs in bulk!

One of the things I always shake my head at in the grocery store is the pre-packaged herbs and spices. Not long ago I found a retailer in my area that offers herbs and spices in bulk containers -- I measure out exactly how much I need, the cashier weighs it, and I save dollars per ounce. What an epiphany it was!

Buying in bulk provides a tremendous cost savings and typically fresher products. Bulk herbs and spices are not everywhere in our state, but I'm sure there are numerous online vendors.

Apart from the lower cost (b/c we're not paying for packaging, large processing facilities or national marketing), bulk is also less wasteful -- I usually only need a small quantity of each product; if I had a whole jar it would likely lose its flavor and I'd have to throw it out.

And now that I buy bulk, I have a reason to reuse the nice little glass jars from my previous pre-packaged buying mistakes (rather than have them stored at the landfill -- I heard today that Cheyenne has a mountain of glass that they're waiting for someone to recycle).

Happy bulk shopping!

Friday, September 25, 2009

Understanding Your Credit Score

As I was thumbing through a copy of Readers Digest the other day I came across a great article explaining how your credit score is computed and what your score means to you. Check it out at Readers Digest online and let me know what you think or if you have any questions that I can answer.


Wednesday, September 23, 2009

Access to Credit Card Information

I'm just returning from a trip having experienced a travelers nightmare. I was standing in the check out line of a busy store and realized that my credit card was gone. Immediately my mind raced through "when did I last use the card" and "where did I put it". I stood in that line and proceeded to thumb through my wallet fighting a sense of panic and dread. Fortunately I had enough cash to cover the transaction. So I proceded to my car to empty the wallet (twice) before I continued the routine of checking every pocket of my travel purse.....the card was gone.

I teach money management and have completed my lesson "What's in your wallet"....a lesson which approaches the topic of identity theft and the reality of how difficult it is to recreate what we have in our wallets and purses from memory. I had a list of my card numbers and the companies phone numbers in a file one thousand miles away, locked in a file cabinent that noone was going to be able to get into. EEgaad, so much for being prepared.

Fighting back the panic I decided to retrace my steps of the previous evening. I had a receipt from the last purchase I had made and couldn't imagine why I'd have a receipt and no credit card. Fortunatley, an honest waitress realized that I had left the card with the signed receipt and she had put the card in the managers office. I drove through rush hour traffic in a strange town to retrieve that card as quickly a possible. And thanked God for honest people all the way back to the restaurant.

The lesson learned which I offer to you today. It is a wonderful thing to keep back up records secure at home. But we need to think about the possiblity of being one thousand miles away and having noone at home to access the locked file.

I've come up with these thoughts to help in case this incident happens again.

a. Keep a small card with the telephone number(s) for the credit card companies in my wallet or purse. This would have made solving my situation easier in this incident but wouldn't help had my entire purse or wallet been lost.

b. Keep a list of credit card contact numbers readily filed in my desk at work.

There's probably other options available. The point is to think about what your options might me to protect yourself should your card be left behind or taken from you.

Monday, August 31, 2009

AG IN UNCERTAIN TIMES - helping producers and others meet the challenge…

The AG IN UNCERTAIN TIMES site provides current information to farmers, ranchers and educators about the challenges in today’s agricultural economy. Their current webinar series, "Operating in the face of uncertain markets", is filled with useful information and advice on getting ahead in today’s commodity, niche, specialty crop, and alternative markets. The September series begins September 9 at 9AM Pacific. (10AM Mountain, 11 AM Central, and 12 noon Eastern).

For more information on their current series as well as accessing previous webinars go to

Wednesday, July 15, 2009

Planning for Retirement

Planning for retirement is a challenge for everyone. The earlier you begin, the longer you will have to accumulate funds and capitalize on compound interest. A plan designed to meet specific retirement goals may be separate from or part of the investment building block.

Some people have given a great deal of thought to retirement, but others have not. Less than half (42%) of working Americans have made a retirement savings calculation, according to the 2006 Retirement Confidence Survey, and 70% have begun to save for retirement. Unfortunately, this means that 30% of workers have not yet begun saving. Most experts believe that regular, systematic savings is a habit that is best established early and maintained, not only throughout the working years, but into the early stages of retirement since people are living much longer. Today, many people spend as many years in retirement as they spent in the workforce.

Financial experts have long described sources of retirement income as the three-legged stool: Social Security, company pension, and personal savings. Now with the growing concern over the future of Social Security, the reduction in benefits offered by employers, and the low personal savings rate, many see the three legs of the retirement income stool becoming shaky. Many say that the stool may need a fourth leg—paid work after retirement.

Now that the Social Security Administration has phased in automatic mailing of Personal Earnings and Benefit Estimate Statements to all wage earners, check yours for accuracy. It contains information that provides an excellent basis for retirement planning. Contact the Social Security Administration (Call 1-800-772-1213 or visit the Social Security Online Web Site to obtain a benefit request form.

Another source of retirement information is your employer’s personnel department which may have general tips on retirement as well as specific information about investments available in your pension plan. Many online sites provide information about retirement planning (See American Savings Education Council The following definitions should be useful in helping you to understand your retirement options.

12(b)1 Fee
A marketing fee levied on mutual fund shareholders to pay for advertising and distribution costs as well as broker compensation.

401(k) PlanAn employer sponsored, tax deferred, retirement plan. It uses pre-tax contributions from an employee’s regular compensation to invest for that employee in a number of possible financial instruments. Some companies will match investments. Plans vary widely between companies.

403(b) PlanA tax deferred retirement plan very much like the 401(k) Plan, but the main difference is that the employer is a non-profit organization.

Account Maintenance FeesFees charged by financial institutions and companies for maintaining accounts. For financial institutions, such as banks and credit unions, the fee may be based on the amount in the account or the number of transactions. For investment companies, such as stock brokerage firms and firms working with mutual funds, the fee is often charged for keeping an account going even though it’s too small for the fund to make a lot of money from it. A fee is also charged by both groups for custodial accounts such as Individual Retirement Accounts.

Annual Percentage Rate (APR)The periodic rate times the number of periods in a year. For example, a 5% quarterly return has an APR of 20%. APR is a yearly interest rate that includes all fees and costs you pay to a lender (such as a credit card company or financial institution) when you borrow money. By law, lenders are required to tell you the APR.

Annual Percentage Yield (APY)
The yearly interest rate received from an investment. Also known as the effective yield. It takes into account how often the interest in paid (compounded). If two interest rates are the same, the one with the most compounding periods will have the highest APY (7% with daily compounding has a higher APY then 7% with quarterly compounding). It is important to always compare APY when comparing different interest rates before making an investment.

Monday, June 22, 2009

Build a Solid Credit History

A solid credit history can be one of your most useful and powerful financial assets. A record of prudent credit use and prompt payments can enable you to not only qualify for credit when you need it, but it may also enable you to get a lower interest rate on your borrowing.

There are three main credit agencies that gather financial information on individuals and then make that information available to lenders to help them determine whether to make a loan to someone. The information they compile includes a great deal of basic data such as age, Social Security number, current and previous addresses, employers and marital status. They also get information on your borrowing history from places you have borrowed such as with credit card issuers, mortgage lenders and others. Your credit report probably includes all the credit relationships you have, date established, maximum allowed credit, current balances and payment history.

Indications of a solid credit history:
• Some, but not extensive borrowing.
• Prompt payment of monthly bills.
• Paying down balances over time.
• Steady employment.

Items that can hurt your credit report:
• Filing for bankruptcy.
• Too many credit cards.
• Too many applications for credit.
• Late payments.
• Increasing credit card balances.
• Several credit cards with balances close to their limits.

Lenders will use a credit report, along with evaluating your capacity to repay, your character and any collateral in making decisions to lend you money. Many lenders also take these same issues into account in deciding what interest rate to charge or type of loan to offer.

It is important to make sure your credit report is accurate and up to date. A federal law enables you to receive a free credit report once a year. You can get this free report by using the website – You can also get copies by calling the credit agencies, but there may be a small charge unless you have recently been denied credit.

• TransUnion – 800/888-4213
• Experian – 888/397-3742
• Equifax – 800/997-2493

If you see an error on the report, be sure to contact the credit agency in writing. Tell them of the error and ask that it be corrected. Negative information generally remains in your credit report for seven years and bankruptcies may remain for 10 years. However, most lenders pay particular attention to your most recent couple of years of activity.

Being aware of your credit report, making sure it is accurate, working to improve your credit characteristics, and understanding the importance of your report can all help you ensure that credit will be there when you need it.

Thursday, June 18, 2009

Budget Helpers

There are a number of free or low-cost programs available on the Web for helping people manage their money. Here are four – each is different, so play around with them and find something that works for you

A downloadable spreadsheet that runs in MS Excel – functional and easy to use. It advertises being able to set up a budget in 10 minutes and maintain it with two 10-minute sessions a month. Creator Charlie Park originally built it for his own use, saying he couldn’t afford a commercial program (like MS Money or Intuit’s Quicken). Download at

SimpleD Budget
A downloadable, Windows-based program, SimpleD Budget was created by programmer Soichi Hayashi for his wife. It has charts and visual aids to see where you’re at on expenses and income versus the amount you’ve budgeted. When setting up the program it offers templates for various stages of life (college student, parent, etc) that provide different categories for expenses. Download at
A web-based budget tool, My Spending Plan can be managed by different people at different locations. Offered by the American Homeownership Association, it offers more than just budgeting; you can also set up reminders about bills. However, the site includes commercial promotions, and because it is online, it operates slower than the downloadable programs. Also, the tool is in the beta stage, so it’s a work in progress. Sign up at

Microsoft Office Personal Budget Template
A downloadable spreadsheet that runs in MS Excel – a very basic budget, so it’s very easy to use. Microsoft offers several choices. The simplest is the ‘personal budget’ in which you can track expenses and income for a year on one page, but there is also a personal monthly budget (which provides detail for one month only, not a year), a family monthly budget, and a number of other budgets for things such as job expenses, events, a garden, a wedding, and marketing. There’s also a personal financial statement (which is a good idea to have so you can track your net worth). Download at Search for ‘personal budget.’

It’s worthwhile to take a look at them all – it may be helpful to build a budget using the categories of one system, then use, for example, SimpleD to track the spending.

Of course, there are other, less technology heavy systems. A spiral notebook and a pen and calculator are one. The envelope method is another. The envelope method goes like this: get a separate envelope for different household expenses such as housing, food, travel, etc., allocate expenses to the different categories according to your income, put the allocated money in its respective envelope, and then use the money from a particular envelope to pay the corresponding bills. The envelope system was designed for cash – actual money would go in the envelope. But you could modify the system so that you just write the amount of money assigned to each category (envelope) on the outside, then subtract that money from the balance. Then when you get to zero, you’d have to quit spending in that category or 'move' money from another envelope.

Wednesday, June 10, 2009

Tools for Saving & Investing

Tools for Saving

The simplest way to begin earning money on your savings is to open a savings account at a financial institution. You can take advantage of compound interest, with no risk.

Financial institutions offer a variety of savings accounts, each of which pays a different interest rate. You can choose to use these typical accounts to save for the near future or for years down the road.

Types of Savings Accounts

Savings account (in general)

  • Access your money at any time
  • Earn interest
  • Move money easily from one account to another.
  • Have your savings insured by the FDIC or NCUA up to $250,000.

Money market savings account

  • Earn interest.
  • Pay no fees if you maintain a minimum balance.
  • May offer check-writing services.
  • Have your savings insured by the FDIC or NCUA up to $250,000

Certificate of deposit (CD)

  • Earn interest during the term (three months, six months, etc.).
  • Must leave the deposit in the account for the entire term to avoid an early-withdrawal penalty
  • Receive the principal and interest at the end of the term.
  • Have your savings insured by the FDIC or NCUA up to $250,000.

Tools for Investing

Investing is not a get-rich-quick scheme. Smart investors take a long-term view, putting money into investments regularly and keeping it invested for five, 10, 15, 20 or more years.

Stocks—Owning Part of a Company

Stocks. Shares of stock may be acquired on an organized exchange such as the Nasdaq or New York Stock Exchange, through a stock-broker, over the counter or by direct purchase in some cases. When you buy stock, you become a part owner of the company and are known as a stockholder, or shareholder. Stockholders can make money in two ways—receiving dividend payments and selling stock that has appreciated. A dividend is an income distribution by a corporation to its shareholders, usually made quarterly. Stock appreciation is an increase in the value of stock in the company, generally based on its ability to make money and pay a dividend. However, if the company doesn't perform as expected, the stock's value may go down.

There is no guarantee you will make money as a stockholder. In purchasing shares of stock, you take a risk on the company making a profit and paying a dividend or seeing the value of its stock go up. Before investing in a company, learn about its past financial performance, management, products and how the stock has been valued in the past. Learn what the experts say about the company and the relationship of its financial performance and stock price. Successful investors are well informed.

Stock options. Some companies offer employees stock options, which they can use to buy stock in the company at a fixed price. For example, your employer, Wally's Widgets, offers a stock-option plan, and its stock is valued at $30 a share. The stock-option price is set at $40 a share. As part of your compensation for meeting company goals and contributing to increased profits, you receive options to purchase 100 shares. Over time the value of the Wally's Widgets shares appreciates to $50 a share. You may now want to exercise your stock options and purchase the shares valued at $50 for $40.

Bonds—Lending Your Money

Bonds. When you buy bonds, you are lending money to a federal or state agency, municipality or other issuer, such as a corporation. A bond is like an IOU. The issuer promises to pay a stated rate of interest during the life of the bond and repay the entire face value when the bond comes due, or reaches maturity. The interest a bond pays is based primarily on the credit quality of the issuer and current interest rates. Firms like Moody's Investor Service and Standard & Poor's rate bonds. With corporate bonds, the company's bond rating is based on its financial picture. The rating for municipal bonds is based on the creditworthiness of the governmental or other public entity that issues it. Issuers with the greatest likelihood of paying back the money have the highest ratings, and their bonds will pay an investor a lower interest rate. Remember, the lower the risk, the lower the expected return.

A bond may be sold at face value (called par) or at a premium or discount. For example, when prevailing interest rates are lower than the bond's stated rate, the selling price of the bond rises above its face value. It is sold at a premium. Conversely, when prevailing interest rates are higher than the bond's stated rate, the selling price of the bond is discounted below face value. When bonds are purchased, they may be held to maturity or traded.

Treasury bonds, bills and notes. The bonds the U.S. Treasury issues are sold to pay for an array of government activities and are backed by the full faith and credit of the federal government. Treasury bonds are securities with terms of more than 10 years. Interest is paid semiannually. The U.S. government also issues securities known as Treasury bills and notes. Treasury bills are short-term securities with maturities of three months, six months or one year. They are sold at a discount from their face value, and the difference between the cost and what you are paid at maturity is the interest you earn. Treasury notes are interest-bearing securities with maturities ranging from two to 10 years. Interest payments are made every six months. Inflation-indexed securities offer investors a chance to buy a security that keeps pace with inflation. Interest is paid on the inflation-adjusted principal.

Bonds, bills and notes are sold in increments of $1,000.

Savings bonds. U.S. savings bonds are government-issued and government-backed. There are different types of savings bonds, each with slightly different features and advantages. Series I bonds are indexed for inflation. The earnings rate on this type of bond combines a fixed rate of return with the annualized rate of inflation. Savings bonds can be purchased in denominations ranging from $50 to $10,000.

Some government-issued bonds offer special tax advantages. There is no state or local income tax on the interest earned from Treasury and savings bonds. And in most cases, interest earned from municipal bonds is exempt from federal and state income tax. Typically, higher income investors buy these bonds for their tax benefits.

Mutual Funds—Investing in Many Companies

Mutual funds are established to invest many people's money in many firms. When you buy mutual fund shares, you become a shareholder of a fund that has invested in many other companies. By diversifying, a mutual fund spreads risk across numerous companies rather than relying on just one to perform well. Mutual funds have varying degrees of risk. They also have costs associated with owning them, such as management fees, that will vary depending on the type of investments the fund makes.

Before investing in a mutual fund, learn about its past performance, the companies it invests in, how it is managed and the fees investors are charged. Learn what the experts say about the fund and its competitors.

Remember, when investing in stocks, bonds and mutual funds:

  • Find good information to help you make informed decisions.
  • Make sure you know and understand all the costs associated with buying, selling and managing your investments.
  • Beware of investments that seem too good to be true; they probably are

How Much Extra Savings Is a Tax-Deferred Investment Worth?

If you pay taxes, which most of us do, a tax-deferred investment will be worth the amount you invest multiplied by the tax rate you pay. For example, if your federal tax rate is 15 percent and you invest $3,000 in an IRA, you'll save $450 in taxes. So in effect, you will have spent only $2,550 for a $3,000 investment on which you will earn money. A good wealth-creation plan maximizes tax-deferred investments.

Monday, June 1, 2009

Creating Personal Wealth

You want to create personal wealth, right? So does Bob.

Bob is 35 and works for a manufacturing company. He looked at his finances and realized that at the rate he was going, there wouldn't be enough money to meet his family's financial goals. So he chose to embark on a personal wealth-creation strategy. Bob began by learning the language of wealth creation to understand the meaning of assets, liabilities and net worth. They make up this very important formula: Assets – Liabilities = Net Worth.

A wealth-creating asset is a possession that generally increases in value or provides a return such as a savings account, retirement plan, stocks, bonds, or a house. Some possessions like a car, TV, boat or clothes are assets but they do not create wealth because they don’t earn interest or rise in value.

A liability, also called debt, is money you owe such as a home mortgage, credit card balances, car loan, hospital and other medical bills.

Net worth is the difference between your assets and liabilities. Your net worth is your wealth!

Most people who have built wealth didn't do so overnight. They got wealthy by setting goals and striving to reach them. Bob set two short-term goals: (1) to save and invest enough in four years to have $6,000 for a down payment on a house, and (2) to pay off his $3,000 credit card debt within two years. Bob also set two long-term goals: (1) to save and invest enough to have $25,000 in 15 years for his children's college education, and (2) to have $5,000 a month to live on when he retires in 30 years.

A personal wealth-creation strategy is based on specific goals that are realistic and have time frames (like Wyoming Saves).

Develop a Budget and Live by It
When it comes to finances, people generally fall into the following groups. Where do you fit in?

Planners control their financial affairs. They budget to save.

Strugglers have trouble keeping their heads above rough financial waters. They find it difficult to budget to save.

Deniers refuse to see that they're in financial trouble. So they don't see a need to budget to save.

Impulsives seek immediate gratification. They spend today and let tomorrow take care of itself. They couldn't care less about budgeting to save.

Knowing what kind of financial manager you are will help determine what changes to make. To maximize your wealth-creating ability, you want to be a planner, like Betty.

Betty is a single parent with one child. "I have to budget in order to live on my modest income. I have a little notebook I use to track where every dime goes. Saving is very important to me. When my son was born, I started investing every month in a mutual fund for his college education. I am proud to say that I control my future. I have bought my own home and provided for my son, and I've never bounced a check. You must have common sense regarding money!"

Lynne, by contrast, is a struggler. Lynne has a good job, makes good money and lives a pretty comfortable life, but her bankbook tells a different story. She has no savings or investments, owns no property and has no plans for retirement. Plus, she's got a lot of credit card debt, lives from paycheck to paycheck and doesn't budget.

You can choose to be like Lynne, or you can follow Betty's road to wealth creation by learning to budget and save.

A budget allows you to:
  • Understand where your money goes.
  • Ensure you don't spend more than you make.
  • Find uses for your money that will increase your wealth.
To develop a budget, you need to:
  • Calculate your monthly income.
  • Track your daily expenses.
  • Determine how much you spend on monthly bills.

Tuesday, May 26, 2009

Start Early for a Comfortable Retirement

Many people don't start thinking about their retirement planning until they are well into their career – then they realize how much valuable time they lost. If you start saving for retirement now, you have the best shot at attaining long-term control over your finances and ending up your life in comfort.

A common way people take advantage of time and compound interest is through an Individual Retirement Account. If you open an IRA in 2007 you can invest $4,000, which is the maximum annual contribution. That $4,000 will be invested in mutual funds, stocks or bonds that will provide a return within the IRA account. By the end of the first year you'll have the original $4,000 investment, plus any income it has earned. Now you've got $4,000 earning interest plus interest earning interest. And on top of that, you can make a contribution in 2008. The entire sum will earn interest and so on.

If you start making annual $4,000 contributions to a Roth IRA at age 37, you'll have contributed $112,000 by the time you retire at age 65. At a 7 percent rate of return, you should have $345,386 in your account at retirement age.

Keys to Retirement Success
  • Start early: the younger you are when you begin contributing to your IRA, the longer your money will have to compound, making it worth even more when you retire.
  • Contribute every year: Even if you're tempted, don't skip your IRA contribution. Give your money the best possible chance to grow by socking away a little bit every year.
  • Resist the temptation to withdraw the money early: You'll have to pay a penalty of about 10 percent and your retirement nest egg will be that much smaller.
  • Aim for a high rate of return: The more your money earns annually, the more you'll have at retirement.
  • Leave the money in longer: Money gets the greatest effect from compounding in the later years, so the longer you can leave it in your account, the more you'll have when you withdraw it.

10 Barriers to Success (from John Bishop of Teaching Moments)

  1. No clear vision – the clearer your vision is of your goal, the faster you will achieve it.
  2. Fear of failure – don’t let worry, fear and uncertainty hold you back from reaching your goal. Eliminate bummer words like never, can’t, maybe or if.
  3. Lack of determination – turn challenges into opportunities. Come at them from the other side.
  4. No action plan – write a detailed, step-by-step plan including a timetable and written strategy that you review every day or week.
  5. Change –make adjustments as needed but don’t lose focus on the goal.
  6. Negative thinking – everyone has some self-doubt. Ask yourself everyday: 1. Did I give my best effort and 2. Did I move closer to my goals?
  7. Lack of enthusiasm – you are your own best cheerleader. Look at all days as good days, some are just better than others. You’ll find your enthusiasm is contagious.
  8. Procrastination – You can have a great written plan, but you must take action. Be self-motivated, determine what motivates you and take action.
  9. Making excuses – take responsibility for your success.
  10. Learn from your mistakes – Everyone makes them. Successful people turn mistakes into learning opportunities.

Roadblocks can actually be stepping stones to success. Identify what holds you back and turn it into an opportunity!

Wednesday, May 20, 2009


What are your attitudes/values about money? Do you tend to do things the way your parents did (or do you find yourself rebelling against their example?) A lot of people would argue that “understanding yourself” (i.e., what drives your spending and saving decisions) is critical to achieving financial success. It is very common for money personalities to get in the way of making good choices.

A study published by the American Psychological Association found that the #1 source of stress for 73% of Americans was money. This emphasizes the importance of exploring our feelings and attitudes about money. The ultimate goal is not necessarily to change your current personality/values to different ones, it is to learn to prosper with the one you have.

Different experts have different names for these money personalities. Jordan Goodman, author of “Master Your Money Type: Using Your Financial Personality to Create a Life of Wealth and Freedom” summarizes money types as:

STRIVERS You are all about achieving success and letting others know just how successful you are by buying lots of stuff. Money equals success. Ambition is the upside; overspending is the downside.

OSTRICHES You are uncomfortable with money, even confused, intimidated or embarrassed by it. So you bury your (financial) head in the sand. The upside is you’re not consumed by money and you focus on more important things in life; the downside is eventually you’ll wind up regretting your avoidance of money problems and not setting financial goals.

DEBT DESPERADOS You get a thrill from buying, which leads to overspending. You quickly accumulate debt and may find yourself on the run from creditors. If there is an upside, it is that you likely understand the anguish debt can cause and that can be used to motivate and provide the resolve to get out of it. The downside is overspending is a weakness that is often bailed out through credit cards.

COASTERS You may be coping or even thriving financially, but a lack of a money crisis has made you comfortable with the status quo. The upside is that you’re organized and responsible. But complacency means you’re missing out on opportunities and greater prosperity.

HIGH ROLLERS You’re a thrill-seeker and gambler with money, thinking you’re smarter than others and are certain you’ll get a ‘big score.’ The upside is that you’re comfortable with risk, which can pay off with big rewards. The downside is that unbridled risk-taking can be dangerous and can land you in financial ruin.

SQUIRRELS You hoard your money like a squirrel gathering nuts for the winter. You’re intensely afraid of losing money and exert a great deal of effort to spend less. The upside is you’re an excellent saver, but often at the expense of other things money is good for – spending, giving, etc.

A recent study by Putnam Investments outlined six financial beliefs and habits that they found to be most important in achieving financial security:

  1. Realistic Expectations
  2. Resisting temptation for quick rewards and fads
  3. Patience in the face of adversity
  4. Greater satisfaction from saving than spending
  5. Ability to tolerate above-average risk
  6. Receptivity to advice on how to save and invest

Source: Dr. Mark Oleson, University of Missouri – Columbia.

Friday, May 1, 2009

Controlling Credit Card Debt

Credit card debt can become overwhelming for some families. Here are some ideas to help you get your credit card debt under control. Feel free to pass this along to others not enrolled in Wyoming Saves.

Never ever pay the minimum. If you can afford to pay more than the monthly minimum on your credit card, do it! With $3,000 on a credit card, a 2% minimum payment and 18% annual interest, it takes over 30 years to repay provided you don’t add any new charges. In the end, you pay a total of $10,013 including interest of $7,013. For this reason, federal regulators have encouraged credit card companies to increase the percentage owed for their minimum payments.

Some experts recommend paying off cards with the smallest debt owed first and ignoring interest rates on the other cards. This costs a tremendous amount in unnecessary interest payments. Debts with higher interest rates grow more quickly. By tackling them first, you will pay off debt faster!

Monday, April 20, 2009

Found Money

We drive miles out of our way to save a few pennies on gas, then go around the corner and use an ATM that charges $2.50 for every withdrawal. There’s no doubt that saving a dollar on a fill-up is gratifying. Imagine how many gallons of fuel we could save if we watched ATM fees, bills and and other parts of life. Here are some easy ways to save money around the house.

Household Bills

  • Shop around. Compare service providers for things like phone and internet. When buying big ticket items compare the offers of at least three providers (make a sheet with the features and options of each so that you’re comparing apples to apples).
  • Cancel unused services. If you’re not watching cable, for instance, as much as you thought, then cut your cable bill down to the basic package, or cut it out of your life entirely.
  • Cut heating bills. Reduce energy costs by as much as 30% using Energy Star appliances and making sure your house is well insulated.
  • Put in some effort. Convenience can be expensive. You’ll spend about twice as much on items such as pre-washed mixed greens and a jar of pasta sauce versus a head of lettuce and the ingredients for marinara.
  • Go generic. Buying the store brand can save up to 50% according to Consumer Reports. And today’s store brands are typically very good quality.
  • Brown bag lunch. Take your lunch to work.
  1. Don’t pamper your car. Unless a high-octane gas is specifically recommended for your car, buy regular unleaded.
  2. Go slow. Improve fuel efficiency by 10% by observing the speed limit and accelerating slowly.
  3. Drive a smaller vehicle. Drive a sedan instead of an SUV or truck.

Monday, April 13, 2009

Credits At Tax Time

April 15th, tax day is just around the corner. For many this can be a very stressful time, especially this year. Following is some information that I hope you will find helpful in preparing your 2008 taxes and/or planning for your 2009 taxes.

Having Trouble Paying Your Taxes?

For those of you who might be having trouble paying your tax bill be sure to still submit your tax return and notify the IRS of your inability to pay. The IRS has a specific form for this purpose. If you have questions on how to obtain the form or what you should do, give the IRS a call at 1-800-tax-1040 or go to your local IRS office to speak with someone in person.

Credits and Deductions at Tax Time Explained

A tax credit lowers your tax bill dollar for dollar. A deduction reduces your taxable income, so the value depends on your tax bracket. If you're in the 25% bracket, a $1,000 deduction lowers your tax bill by $250. But a $1,000 credit lowers the bill by the full $1,000, no matter in which bracket you are.

Tax Credits You Should be Aware of

Home Energy Efficiency Tax Credits
The Energy Policy Act of 2005 established tax credits for energy efficiency retrofits and on-site renewable energy projects. Many of these incentives that were due to expire in 2007 or 2008 have been extended or expanded. Following are some of the energy efficiency and renewable energy project tax incentives that might be of most benefit to you.

Residential Efficiency Incentives
These incentives provide a tax credit of 30% of the cost of materials up to $1,500 for home envelope improvements. Home envelope improvements include improvements to windows, insulation, roofs, duct sealing, etc. This credit is also available for high efficiency heating, cooling and water heating equipment. When making improvements to your HVAC system, the tax credit also applies to the cost of the labor to install the equipment. In order to qualify for the tax credits the improvements must have been placed in service in 2009 or 2010 and installed in the taxpayer’s principal residence only.

On-Site Renewable Generation Incentives
These incentives provide a tax credit of 30% of the system cost for installing (materials and labor) solar energy systems, small wind systems and geothermal heat pumps. This tax credit can be used for systems put in service in 2008 through 2016. There is no cap on the tax credit for systems put in service starting in 2009. Those systems put in service in 2008 must comply with earlier caps. This tax credit is NOT limited to the taxpayer’s principal residence.

For the specifics of how to qualify and receive these incentives please visit the following web resources

Child Tax Credit
Many working families can qualify for the Child Tax Credit and get up to $1,000 for each child under 17— in addition to the EIC for which they may qualify. To be eligible for the CTC refund, a single or married worker must:

  • have a qualifying child under age 17;
  • have taxable earned income above $11,300; and
  • have either a Social Security number (SSN) or an Individual Taxpayer Identification Number (ITIN). ITINs are issued by the IRS to individuals who are unable to obtain a Social Security number.

To get the Child Tax Credit you must file a federal income tax return — Form 1040 or 1040A, but not 1040EZ and file form 8812.

Earned Income Credit
If your family works but doesn’t earn much money, there’s a way to reduce taxes or get a refund, even if you don’t earn enough to pay federal taxes. It’s the Earned Income Tax Credit.

The EIC is a special tax benefit for working people who earn low or moderate incomes. Workers who qualify for the EIC and file a federal tax return can get back some or all of the federal income tax that was taken out of their pay during the year. They may also get extra cash back from the IRS. Even workers whose earnings are too small to owe income tax can get the EIC. What’s more, the EIC offsets any additional taxes workers may owe, such as payroll taxes.

Who can get the EIC and how much is it worth?
Single or married people who worked full-time or part-time at some point in 2006 can qualify for the EIC, depending on their income.

Workers who were raising one child in their home and had income of less than $32,001 (or $34,001 for married workers) in 2006 can get an EIC of up to $2,747.
Workers who were raising more than one child in their home and had income of less than $36,348 (or $38,348 for married workers) in 2006 can get an EIC of up to $4,536.
Workers who were not raising children in their home, were between ages 25 and 64 on December 31, 2006, and had income below $12,120 (or $14,120 for married workers) can get an EIC up to $412.

Workers with investment income exceeding $2,800 in 2006 may not claim the EIC.

Here’s an example of how it works. In this case eligible workers can pay less in taxes and get a check from the IRS.

Mr. and Mrs. Johnson have two children, ages 20 and 21, in college. They earned $29,000 in 2006 and owe the IRS $550 in income tax, none of which was withheld from their pay during the year. Their income makes them eligible for an EIC of $1,936. So, the EIC eliminates their $550 income tax — now they don’t owe IRS anything — and gives them a refund of $1,386.

Getting the Credit
If you have children in your home then to get the EIC you must file either Form 1040 or 1040A and must fill out and attach Schedule EIC. Workers with children cannot get the EIC if they file Form 1040EZ or do not attach Schedule EIC. The children must meet some qualifications.
Workers who were not raising a “qualifying child” in their home in 2006 can file any tax form — including the 1040EZ.These workers write “EIC” (or the dollar amount of their credit) on the Earned Income Credit line on the tax form. They do not file Schedule EIC.

Tax Preparation Assistance
Low-income workers can get free help with tax preparation through a program called VITA (Volunteer Income Tax Assistance). To locate the nearest VITA site, call 1-800-829-1040.

Friday, April 3, 2009

enroll now for a chance to win Suze Orman's 2009 Action Plan

It's not too late to enroll in Wyoming Saves and be eligible for the drawing for Suze Orman's 2009 Action Plan book. Wyoming Saves is part of a national effort called America Saves in which over 67,000 Americans have committed to achieving a savings goal. To help people save, Cole Ehmke, UW Extension specialist, collected several resources of interest. The information given herein is supplied with the understanding that no discrimination is intended and no endorsement by Cooperative Extension is implied.

In addition to managing the Wyoming Saves program I am also a participant. Today I transferred my first installment of my savings goal into my savings account.

If you have any questions or concerns about your participation in Wyoming Saves, please let me know. I am here to support you and be a resource for you to help you achieve your savings goal.

Following is the first article that was sent to Wyoming Saves Participants.

Two great ways to establish automatic savings
(1) Online Savings Accounts – provide high yields; all of the following currently pay 5%+, with no minimums to establish (or maintain) an account, no fees, and are FDIC insured.
a. Emigrant Direct
b. FNBO Direct
c. HSBC Direct

(2) Mutual Funds – while many mutual fund companies require a large initial investment to open a mutual fund account, some companies will waive the initial investment if you establish an automatic investment (typically $50/month). T.Rowe Price and TIAA-CREF are a couple of notable ‘no load’ fund companies; AIM Funds and American Funds are examples of load fund companies that allow for automatic investments to open accounts. The Mutual Fund Investor Center provides a search tool to find companies that accommodate people looking for automatic investment opportunities.
A recent Federal Reserve Board study identified successful saving strategies:
- Have a reason to save. Households with an identifiable goal for saving were more likely to have financial assets (and also have higher levels of assets). Setting a goal is an important part of any saving strategy.
- Think ahead, plan ahead. Looking into the future can be an important motivational tool to help people anticipate and be prepared for future expenses. The most prominent goal of the Savers in the program is to develop an emergency fund. Many experts recommend having a fund that could cover three or more months of living expenses.
- Develop a savings habit. It is no secret that getting started is the biggest challenge people face financially. Once the habit is developed, people comment on how “second nature” saving becomes.
- Make savings automatic. Automatic savings via payroll deductions or automatic transfers from a checking or savings account is one strategy found to be very effective in “creating” Savers.

Friday, March 27, 2009

Get Ready for Wyoming Saves Give-Aways

Start thinking of your money saving ideas now. Throughout the Wyoming Saves program you will have an opportunity to share your savings tips and vote on which savings tip you think is the "best". Prizes will be awarded to the savings tip that receives the most votes.

The April 1st Kick Off date for Wyoming Saves is fast approaching. Be sure to get your enrollment form to us right away. And don't forget to talk to your friends and neighbors and encourage them to sign up.

For those of you who are die hard procrastinators, no worries. Just get us your enrollment form as soon as you can.

Please be sure and give me a call if you have any questions about participating in this great program.


Wednesday, March 11, 2009

Wyoming Saves - Be a Part of Making a Positive Difference

Times are tough. While the federal government is doing everything it can to encourage more spending. I am here to encourage you to do more saving. In uncertain financial time like these, accumulating a healthy savings account is one of the best ways to take charge of your finances. According to Consumer Federation of American (CFA) research the typical family has under $10,000 of net financial assets and many families are losing wealth. Low to moderate income households have accumulated even less money and typically have less than $1,000 saved. Even more distressing than the lack of savings is the number of families living paycheck to paycheck.

Nobody wants to feel the stress of knowing that they are only a paycheck or two away from financial disaster because they lack money to fall back on when “stuff happens”. In today’s economy, news of job losses is a daily occurrence. Even if your job is secure other financial emergencies can and do occur, such as getting hurt and not being able to work, having a vehicle break down or needing to care for an elderly parent or a sick child.

Even amidst all of this financial turmoil you have the ability to make a positive difference in your life. Starting and/or expanding your family’s savings program is important not only for your financial peace of mind, but it also teaches your kids valuable lessons that they will help them for the rest of their lives. The University of Wyoming Cooperative Extension Service and your local federal credit unions are here to help. As part of the national “America Saves” campaign to build wealth, we are rolling out the “Wyoming Saves” campaign. The goal of “Wyoming Saves” is to enroll individuals, families and groups to either increase their savings or reduce debt during three months. By making savings a habit, we can make a difference not only in our own lives, but in our community.

How Can You Help
PARTICIPATE (do what works and share your ideas)
  1. Individually—complete the enrollment form then track your progress.
  2. Pairs—enlist a partner, perhaps someone not in the habit of saving money. Complete enrollment forms for both of you then track your progress on the individual progress reports.
  3. Families—enroll as a family. Set a family financial goal or set individual goals for each family member. Complete a group enrollment form for the entire family then track your progress on the group progress report.
  4. Groups—form a team at work, with friends or neighbors, with your 4-H club or another organization to which you belong. Become the team leader, sign everyone up on the group enrollment form, and be responsible for tracking progress on the group progress report. As the group leader your team will look to you for encouragement and for distributing the educational materials.
Commit to a Goal
It matters more about forming a habit than the amount saved. New savers can take baby steps—$1 a week or month, or just begin saving pocket change. As the campaign progresses savings ideas will be shared with you and you will have the opportunity to share your savings strategies and compete for prizes.

Request copies of the “Wyoming Saves” flier or informational letter and distribute via:

  • E-mail to your friends and co-workers.

  • Posting it on bulletin boards throughout your community.

  • Including it in your newsletters or other correspondence.

  • Passing out fliers at your regular meetings.

  • Mentioning it during phone calls or email-conversations and encouraging participation.

While it would be impressive to see a significant amount of dollars saved or debt reduced, remember what this is all about—FORMING A SAVINGS HABIT! Implementing and sticking to a savings plan will enable you to achieve long term financial success.

How To Participate

Download the enrollment and progress report forms as well as the promotional fliers and letter from the Wyoming Saves box on the right hand side of this page. Alternatively, you can request the forms and information from your local UW Cooperative Extension Service office or participating Credit Union or Bank . You can also request the documents via email at or by phone at 307-633-4383.

Participating Credit Unions & Banks

  • First Education Federal Credit Union

  • Meridian Trust Federal Credit Union

  • Warren Federal Credit Union

  • Western Vista Federal Credit Union

  • Unified People’s Federal Credit Union

  • WyHy Federal Credit Union

  • First Cheyenne Federal Credit Union

  • Cheyenne Laramie County Employees Federal Credit Union

In order to participate fully, enrollment forms must be received by April 1st, 2009!

Friday, February 6, 2009

Delinquent Mortgage Borrowers . . . what to do

Doing nothing is the worst thing a delinquent borrower can do. And the longer the delay, the worse it gets.

US Comptroller of the Currency John Dugan says, "The record shows that the early stages of mortgage delinquency are the most crucial. The sooner borrowers reach out for help, the more options they have, and the more likely foreclosure may be avoided."

In half of all foreclosures, lenders say borrowers do not make contact with them. Yet, more than a third of those who reach out for assistance are successful in finding alternatives to foreclosure.

Homeowners experiencing financial difficulties can call 1-888-995 HOPE, a toll-free hotline staffed around the clock, seven days a week, by 85 qualified housing counselors from agencies approved by the Department of Housing and Urban Affairs.

Friday, January 30, 2009

National EITC Awareness Day

Today is the third annual National EITC Awareness Day. The EITC, also known as the Earned Income Tax Credit, is a federal tax credit available for individuals who work but did not earn a significant amount of income. If you are eligible, utilizing the EITC will reduce your taxes and result in a tax refund for you and your family.

To learn more about the EITC and whether you qualify go to


Tuesday, January 20, 2009

IRS takes liberal stance on how homebuyer credit is allocated between unmarried purchasers

Information below provided by Cole Ehmke

Many of you bought a new home or are considering the purchase of a new home, and so you may qualify for a new tax credit. The Housing and Economic Recovery Act of 2008 authorizes a $7,500 tax credit for qualified first-time home buyers purchasing homes on or after April 9, 2008 and before July 1, 2009. The following text outlines provisions for this credit. The credit is recaptured over the next 15 years as an addback to your federal tax liability. Thus, this credit and 15 year payback is in essence a tax free loan by the government to purchase your first home.

If this fits your situation, see your friendly neighborhood tax accountant.

Notice 2009-12, 2009-6 IRB
A new notice provides guidance under Code Sec. 36(b)(1)(C) for allocating the first-time homebuyer credit between unmarried taxpayers. It allows use of any reasonable method and shows how a full credit can be obtained even where one buyer wouldn't qualify for any amount of credit under the phaseout rules.

New refundable tax credit for first time homebuyers. For qualifying purchases of principal residences in the U.S. after Apr. 8, 2008 and before July 1, 2009, eligible first-time homebuyers may claim a refundable tax credit equal to the lesser of 10% of the purchase price of a principal residence or $7,500 ($3,750 for married individuals filing separately). (Code Sec. 36)

Who is eligible. A taxpayer is considered a first-time homebuyer if he (or spouse, if married) had no present ownership interest in a principal residence in the U.S. during the 3-year period before the purchase of the home to which the credit applies. (Code Sec. 36(c)(1))

RIA observation: Because only prior ownership in a principal residence is considered, it's possible for a taxpayer who already owns a vacation home to claim the new credit, if he otherwise qualifies. For example, a taxpayer whose principal residence for at least three years has been a rental apartment in the city, and who owns a seaside home, could claim the credit for the purchase of a new principal residence if his modified AGI doesn't exceed the phaseout levels.

Special rule for 2009 purchases. Eligible first-time homebuyers who purchase a principal residence after Dec. 31, 2008, and before July 1, 2009, may elect to treat the purchase as made on Dec. 31, 2008. ( Code Sec. 36(g).

Meaning of “purchase.” A “purchase” is any acquisition, but only if (i) the taxpayer did not acquire the property from a related person, and (ii) the taxpayer's basis in the property is not determined, in whole or in part, by reference to the basis of the property in the hands of the person from whom the taxpayer acquired the property (e.g., as occurs with a gift), or determined under Code Sec. 1014(a) (relating to property acquired from a decedent). (Code Sec. 36(c)(3)) A person is treated as related to another person if the relationship would result in the disallowance of losses under Code Sec. 267 or Code Sec. 707, except that members of a family of an individual include only the individual's spouse, ancestors, and lineal descendants.

RIA observation: Thus, for example, the credit is not allowed for a home purchased by the taxpayer from his spouse, parent, grandparent, child or grandchild.

Phaseout of credit. The first-time homebuyer credit phases out for individual taxpayers with modified adjusted gross income (MAGI) between $75,000 and $95,000 ($150,000-$170,000 for joint filers) for the year of purchase. MAGI is adjusted gross income for the tax year increased by any amount excluded from gross income under Code Sec. 911 (foreign earned income and foreign housing exclusions), Code Sec. 931 (exclusion of income derived from American Samoa) or Code Sec. 933 (exclusion of income from Puerto Rico). (Code Sec. 36(b)(2)) Specifically, the amount allowable as a credit is reduced by the amount that bears the same ratio to the credit allowable as (1) the excess (if any) of: the taxpayer's modified AGI (MAGI) for the tax year, over $75,000 ($150,000 for a joint return), bears to (2) $20,000. (Code Sec. 36(b)(2)) The credit is completely phased out for a taxpayer whose MAGI is $95,000 ($170,000 for married taxpayers filing a joint return).

Recapture rules. The credit for new homebuyers is recaptured ratably over fifteen years, with no interest charge, beginning with the second tax year after the tax year in which the home is purchased. For each tax year of the 15-year recapture period, the credit is recaptured as an additional income tax amount equal to 6 2/3% of the amount of the credit. As discussed in Federal Taxes Weekly Alert 09/18/2008, this repayment obligation may be accelerated or forgiven under certain exceptions. (Code Sec. 36(f))

RIA observation: In other words, the credit for new homebuyers is the equivalent of a long-term interest-free loan from the government.

RIA observation: On Jan. 15, House Ways and Means Committee Chairman Charles B. Rangel (D-NY) issued a press release outlining the portion of the economic recovery package to be taken up by his committee. The package would include a number of tax breaks including enhancement of the homebuyer credit—for homes bought after Dec. 31, 2008, and before June 30, 2009, it would remove the repayment requirement for the credit.

Where to claim credit. For eligible purchases in 2008, a taxpayer claims the credit by attaching Form 5405, “First-Time Homebuyer Credit,” to the taxpayer's 2008 tax return. For eligible purchases in 2009, a taxpayer may elect to claim the credit for 2008 or 2009 by attaching Form 5405 to the taxpayer's original or amended 2008 tax return or 2009 tax return.

Unmarried persons. Code Sec. 36(b)(1)(C) provides that IRS may prescribe the manner in which the first-time homebuyer credit is allocated between two or more taxpayers who are not married for federal tax purposes and who purchase a principal residence. The total credit allocated between the taxpayers cannot exceed $7,500.

Any reasonable method allowed. Notice 2009-12 says that, for purposes of Code Sec. 36(b)(1)(C), if two or more taxpayers who are not married purchase a principal residence and otherwise satisfy the Code Sec. 36 requirements, the first-time homebuyer credit may be allocated between the taxpayers using any reasonable method. It goes on to say that a reasonable method is any method that does not allocate any portion of the credit to a taxpayer not eligible to claim that portion. A reasonable method includes one that allocates the credit based on (1) the taxpayers' contributions towards the purchase price of a residence as tenants in common or joint tenants, or (2) their ownership interests in a residence as tenants in common. Notice 2009-12 includes several examples of credit allocations, some of which are reproduced below. Unless otherwise indicated, each example assumes that A and B (i) purchased a principal residence on May 1, 2008, (ii) are not married to each other, (iii) do not have MAGI in excess of the MAGI threshold, and (iv) are first-time homebuyers who otherwise satisfy the Code Sec. 36 requirements.

RIA Research References: For the first-time homebuyer credit, see FTC 2d/FIN ¶ A-4271; United States Tax Reporter ¶ 364.

Source: Federal Tax Updates on Checkpoint Newsstand tab 1/16/09

Friday, January 16, 2009

Financial Fitness Quiz

For those who missed the "Making the Most of Your Money" session on Wednesday, I have posted a subset of the questions from the financial fitness quiz activity that Cole Ehmke went through. If you have the time, I encourage you to take the quiz and see how your financial fitness is compared to others. The quiz questions can be found on the right underneath the "Whats Happening" section. Just let me know if you would like to have the complete version of the quiz to get a comprehensive evaluation of your financial fitness.