Things to think about (1)

1.      Ben Collins plans to buy a house for $65,000. If that real estate property is expected to increase in value 5 percent each year, what would its approximate value be seven years from now?

91455

2.      At an annual interest rate of five percent, how long would it take for your savings to double?

14.4 years

3.      In the mid-1990s, selected automobiles had an average cost of $12,000. The average cost of those same motor vehicles is now $20,000. What was the rate of increase for this item between the two time periods?

60%

4.      A family spends $28,000 a year for living expenses. If prices increase by 4 percent a year for the next three years, what amount will the family need for its living expenses?

31496.20

5.      What would be the yearly earnings for a person with $6,000 in savings at an annual interest rate of 5.5 percent?

$330

6.      Elaine Romberg prepares her own income tax return each year. A tax preparer would charge her $60 for this service. Over a period of 10 years, how much does Elaine gain from preparing her own tax return?  Assumes she can earn 3 percent on her savings.

687.83

7.   Tran Lee plans to set aside $1,800 a year for the next six years, earning 4 percent.  What would be the future value of this savings amount?

       11939.36

8.   If you borrow $8,000 with a 5 percent interest rate to be repaid in five equal payments at the end of the next five years, what would be the amount of each payment?

            1848

9.   Based on the following data, compute the total assets, total liabilities, and net worth.

Liquid assets, $3,670                               Household assets, $89,890

Investment assets, $8,340                        Long-term liabilities, $76,230

Current liabilities, $2,670

Assets: 101900

Liabilities: 78900

Net worth: 23000

10. Which of the following employee benefits has the greater value?  (Assume a 28 percent tax rate.)

A nontaxable pension contribution of $4,300 or the use of a company car with a taxable value of $6,325. 

The nontaxable pension has an after tax value of 5972.23 (4300/(1-.28)). Since this is less than the 6325 value of the car, the car has the greater value.

Credit Unions and Banks: What's the Difference?

Savings banks and credit unions serve many of the same purposes, but they have important differences.

They have distinct ownership-- A credit union is owned by its members, the account holders. Where a bank is a corporation and owned by shareholders.

Membership-- credit unions restrict who can be a member, using such criteria as being employed by a particular employer or industry, or living within a certain state. Banks don't have such restrictions.

Rates-- Generally, because a credit union does not have to profit shareholders, they pay better rates on deposits and offer better terms on loans than banks do.

Safety-- Credit Unions are not FDIC insured. They have their own form of insurance, provided by NCUSIF. Banks, of course, are FDIC insured.

What is Fiat Money, and What happened to the Gold Standard?

The Fiat system means that the value of money is determined by the power backing the money. The money itself has no value except that the government says so. Our dollar bills are just worthless pieces of linen paper without the government backing and guarantee.

Under the gold standard, the dollar was worth something in and of itself because it was easily exchanged for gold. The US decided to leave the gold standard after Briton did. There were runs on the bank and people were worried about the USD and converting it for gold. FDR realized that in order to save the banking system it might be necessary to abandon the gold standard. His advisers all disagreed, except for one. Taking the advise of that one adviser, the end of the gold standard was embraced here in the US.

Economists now hold it as fact that one of the reasons we came out of the Great Depression was because of that move away from the gold standard. Not being on the gold standard gave the government power to change interest rates and to control the flow of money into and out of the economy.

Always Use Protection

Financial Fitness 2015 tip number 2:



 Always use protection. 

Identity theft is a fast growing crime and is particularly common around and after the holidays. One of the things that makes identity theft such a major problem is that often people don't realize that their information has been compromised until well after the fact. In some cases, it can take years to discover that something is wrong. 

Don't let this happen to you. Check your credit annually at  annualcreditreport.com and sign up for identity theft protection from your financial institution. Do it now, before it is too late. 

Identity theft protection might cost you a little bit monthly at the bank (my customers pay 12.99 a month) but the fee is well worth it. Included is a copy of the credit reports, credit monitoring, and assistance in fixing your credit report. With as many things that your credit report effects, you can't afford to be without protection.

52 Week Challenge

It's a new year! Welcome to 2015!

If you are ready to get serious about your financial life, come take a journey with me this year. Let's work on getting back to the basics; making money management easy, convenient, and effective.

With the new year, people across the world are resolving to better their lives in some way or other. Many are making unrealistic resolutions that they will keep for a week or two. I am about to propose a resolution that you can and should make.

I want you to save $1378 extra this year.

And we are going to do it together. Here's how.

First, open a new savings account. I personally use American Express for this for a couple of great reasons. First, the interest rate is about as high as you can find out there right now. At the time of this writing, the rate is 0.85% APY, 85 times what I am making at my local bank. Second, keeping this money away from my local bank makes it harder for me to raid the account when I think I need it. That severely cuts down on the temptation.

After you have an account set up, start scheduling transfers. Every week, on Friday, transfer an amount equal to the week into your new savings account. For example, this Friday, the first of 2015, transfer a single dollar. Next Friday, the 9th, is the second week of 2015, so transfer 2 dollars. and so forth until the end of the year when on the last Friday you are transferring 52 dollars.

At first, this is going to seem easy. And it is. In January you will have put in only $15. But you may be thinking of December. How are you going to swing over $50ish a week? Especially when there is Christmas shopping to do?!

Well, we are going to work this year to put ourselves on a stronger financial footing. As the weeks pass, our situation will, hopefully, improve. And by the end of the year, the habit will have become so normal that you will have learned to live within your means.

So give it a shot. Let's start saving and taking care of our financial futures.

Your Dating Life and your Money

It shouldn't come as a shock that when you become involved in a relationship there is a real and substantial impact on your personal finances. And I don't just mean that you now have to buy anniversary and birthday gifts (or, in the case of my ex-wife, she demanded "monthiversary" gifts. Ouch).

Your partner's spending and saving habits are going to affect you directly. One of my favorite quotes from the Wall Street Journal is:

"Whether you wind up with a nest egg or a goose egg depends on the kind of chick you married."

 Sorry ladies. The quote is obviously geared towards men, but the principle is the same either way. Having a serious talk about finances before things get too serious may not be the most romantic of conversations, but it is vital to your own financial health.

Don't compromise your financial future. You will both be happier with that nest egg when you need it than with a monthly bauble that she'll soon forget.

A Look at Checks: The Back of the Check

We looked at the front of a check several weeks ago, it is time to look at the back. At first glance there isn't really much to see. Usually, the only relevant thing on the back of the check is the signature line.

The signature line on the back of the check is extremely important, and often handled incorrectly. It is deceptive in its simplicity, it is one of the most important parts of the check. Signing the back of the check, or "endorsing" it transfers ownership of the check. When you sign the check, you are assuming responsibility for the check as well.

Assuming responsibility. What exactly does that mean?

Recall that a check is, in essence, a contract between you and the person that wrote it out to you. They are agreeing to transfer funds to you. By signing the back of that check you are agreeing to receive those funds, take possession of them, and be completely responsible for those funds, even before you receive them.

If that check is no good, you are liable for the check. You took ownership and responsibility for the check. If you deposited the check in your bank account, the bank will subtract the amount of the check from your account and charge you a fee for depositing a bad check. If you cashed the check, the bank will take money out of your account for cashing a bad check, and also charge you a fee.

The reason for the fee? Essentially, the bank gave you an unsecured, short term loan when they let you use that money while the check was still out and had not yet been returned unpaid.

Now that we have talked about the importance and significance of endorsement, let's look at how the endorsement should be done.

The back of the check should be signed exactly the same way as the front of the check is made out.

But that's not MY signature, I don't ever sign with my full name! You might be thinking.

In that case, sign your name as it appears on the front of the check and then resign like you normally do underneath it.

But they misspelled my name! Same as above, sign it wrong then sign it right.

If the front of the check is made payable to you AND someone else, you both need to sign the check.

If the check is made payable to a minor, the legally responsible guardian can sign the back of the check as follows:

The name on the front of the check
the words "A minor by"
The guardian's signature, followed by the relationship of the guardian, aka, "mother"

Generally, this is all there is to signing the back of a check. Writing the words "For deposit only" is NOT an endorsement, the check still needs to be endorsed. Although, writing "for deposit only" restricts what can happen to the check and it often done for security.

There are other ways to endorse a check, but don't do them. I won't even go into them here. Any financial institution paying even a little attention will invalidate the check if you try to endorse it using another method and you will have to go back to whoever made the check out to you and get a new check.