This post comes from Sean T. Johnston at our partner site Zing
If you’re a tax-paying homeowner, there might be some bad news on the horizon.
Our legislators in Washington, D.C. haven’t exactly seen eye-to-eye on a lot of things in 2013. In addition to contentious and ongoing debates on the debt ceiling and sequestration cuts, it appears as though a number of tax deductions might be left to expire, including several that involve homeownership.
The Good News
These tax deductions are really popular, and if there’s one thing that politicians love doing, it’s pleasing their constituents. According to Stephen Fishman of Inman News, the Obama Administration and several key members of Congress have been working to extend some of the expiring credits.
Their efforts are complicated by the fact that many politicians are looking for far-reaching and comprehensive tax reform and there could be resistance to picking and choosing which deductions and credits to extend, instead of tackling the whole issue.
While preliminary efforts have stalled, Congress could work quickly or retroactively to reinstate certain tax deductions, should a consensus be reached.
The Bad News
We all know the political winds shift quickly. But as of right now, there’s been no action to extend or prolong certain key tax deductions. It’s unlikely that Congress will take any action before the holiday recess, and the current tax legislation is set to expire on December 31. Barring last-minute, miraculous or retroactive action, it looks like homeowners will have to start accepting the reality that these tax incentives might be gone.
The Potential Impact
In a separate article, Fishman details all of the real estate tax implications of the legislation expiring. You can see the full list here, but below is a summary of some of the major ones and how they could impact you in 2014:
- Mortgage insurance premiums deduction – As long as your income wasn’t over the maximum threshold and provided your mortgage met certain standards, you could deduct your PMI premiums the same way you could mortgage interest. Not anymore, unless Congress acts.
- Discharge of indebtedness on principal residence exclusion – A fancy way of saying that, in certain circumstances, you were able to exclude up to $2 million of debt forgiven if your primary residence underwent a short sale, restructuring or loan forgiveness of some kind. Any such principal reduction will be counted towards your taxable income as of 2014.
- Tax credit for qualified energy efficiency improvements to principal residence – You used to be able to deduct up to $500 annually for making energy-efficient improvements (like insulation, windows, doors and roofs) to your primary residence. Looks like this is going away too.
As our elected officials continue to debate the federal budget, more cost-cutting measures like the elimination of tax incentives will no doubt be discussed.
Nobody likes having to pay more taxes. But are these steps necessary to balancing the budget? Give us your thoughts by posting a comment below!
More stories from Zing:
General Electric has been active in the financing business for a very long time, but not in a way that hits you in the face. Don’t let their obscurity fool you, though. In banking, size has its advantages and, in terms of assets, General Electric is a powerhouse. Its banking operations have survived a number of recessions, including the Great Recession, and even grown. It therefore answers the bell on the most important question you can have about a bank: How safe is it?
GE Capital Bank Savings Accounts
GE Capital Bank isn’t a traditional bank, in that it doesn’t have branches and offer consumer mortgages and personal loans. It lends primarily to businesses, and its retail operation focuses on deposit-taking (i.e., savings accounts and similar activities).
After safety, the interest rate paid on deposits is the next most important concern for customers, and this is exactly where GE Capital Bank shines. It is able to offer some of the best savings account rates around. A number of factors make this possible — it only operates online and, because of this simple fact, its cost structure is lower than a traditional bank’s cost structure. But that is just the beginning. The fact that they are focused solely on the savings side of the business is another reason they can be expected to remain competitive in the rates they offer.
Other banks offer the option of an ATM card in order to withdraw cash, but GE Capital Bank only offers online transfers and, at extra charge, wire transfers. In line with other savings institutions, there is a limit of six withdrawals per month, after which there is a $20 charge per transaction.
No minimum balance is required to open a savings account, but a $50 minimum balance ongoing is required to avoid a $5-per-month service charge. Deposits are limited to $1 million (if that is something you absolutely need to know).
GE Capital Bank’s savings accounts are FDIC-insured to the maximum amount. Interest is compounded daily and added monthly in both cases, giving you the best possible cash value for a given rate.
GE Capital Bank Certificates of Deposit (CDs)
GE Capital Bank units offer CDs and, in line with their savings accounts, the bank works to keep rates on these savings instruments among the best in the nation as well. There is a sliding rate of interest, depending on the amount invested. This makes general comparisons difficult, and it will pay you to take a look at its CD web page to determine which offering suits your exact needs. Terms offered range from six months to six years.
GEC offers great flexibility in withdrawing interest on CDs, pretty much however and whenever you like, without the penalty which would accrue for premature withdrawals on the CD itself.
The website is laid out cleanly and is easy to navigate. A toll-free number is prominently displayed at the top of the page to make it easy to get hold of a live person for help, but the site also has by far one of the best FAQ pages for financial institutions.
The website offers a nifty tool which is pretty useful. It’s a calculator which shows the value of your savings, lump sum, monthly amount, or both combined.
GE Capital Bank is tailored toward online users who conduct their business electronically. Its website and tools are simple, easy to find, uncluttered and easy on the eye. Compared with other online financial institutions, GE Capital Bank is hard to beat when it comes to savings accounts and CDs, both for the rates offered and the ease of operation of their website.
Few banks have had as profound an impact on our daily lives as Ally Bank. Back in the time of Model T Fords, all automobiles were paid for in cash. General Motors created the General Motors Acceptance Corporation (GMAC) in 1919 to offer their customers easy access to credit, helping more individuals to afford their own automobile. To say the concept of consumer credit and an automobile in every driveway has transformed the way we live today would be an understatement.
Introducing Ally Bank
After the turn of the millennium, GMAC expanded into other forms of banking and became a fully fledged bank. During the Great Recession, GMAC spun off from GM and was renamed Ally Bank.
Given its roots as the primary financier for the largest automotive company in the world, it’s not surprising that Ally Bank is one of the largest banks in the nation. Not just one of the largest — for the last three years in a row, Ally Bank has won the Money magazine award for the best online bank.
Savings accounts at Ally Bank
Compared to other banks, Ally Bank has one of the most competitive offerings in its savings accounts:
- New customers can open a new account from their home with a paper check using the eCheck deposit system
- There are no fees or minimums, and interest compounds daily to ensure maximum earnings
- Interest rates are competitive and change often to reflect changing market conditions
In addition, Ally Bank offers a full slate of online tools to make banking easy and convenient. From checking balances online to moving money between accounts and making deposits from your smartphone, Ally has all the technology of a market leader.
Ally Bank CDs offer 10-day rate guarantee
Ally Bank offers some of the best CD interest rates, with various maturities. Unlike many others, though, they also offer one with no penalty for early withdrawal.
When opening a CD (or renewing one), Ally Bank customers are protected with a 10-day rate guarantee: If rates rise within ten days of opening or renewing a CD, the customer will get the benefit of that increase but be cushioned from any drop during that 10-day period.
In the event that interest rates rise in the next few years, Ally Bank offers a program to increase the rate once on a two-year CD, and twice on a CD with a four-year term. Called “Raise Your Rates,” that feature includes notifications to let customers know when interest rates go up, and is a benefit not offered by many other banks.
Checking at Ally Bank — Some pretty nifty perks
As a national online bank, Ally impresses with its truly free checking account. It gives checking account holders free ATM cards, which they can use anywhere. Ally Bank reimburses other banks’ ATM fees, which means they offer probably the widest ATM network of any bank — for free.
Like many other banks, check-writing is free. Unlike other banks, even the checks themselves are free. Not many other banks go that far to offer truly free checking. Bill pay, too, is free.
Ally Bank also offers its checking account customers an excellent online system, including mobile banking apps for the major platforms. This includes the ability to deposit checks on computers or mobile devices with their Ally eCheck Deposit system.
And finally, Ally Bank is one of the few banks that offers interest on its checking accounts, with balances over $15,000 earning more.
Money market accounts
Ally Bank offers a money market account worthy of consideration and, like their other accounts, it also requires no minimum opening deposit. Even though the rate varies, interest is compounded daily. Coupled with Ally’s commitment not to ding customers with monthly maintenance fees, the money market account is another great opportunity to maximize earnings on deposits. In addition, the account can even be used for a trust.
Ally Bank auto loans
It’s not surprising that Ally Bank is one of the most competitive direct sources of funding for car loans, given its history as one of the largest auto finance companies in the world.
While Ally Bank offers traditional term loan and lease financing, it separates from the competition with its innovative combination of those two traditional methods of auto financing. Called ABC (Allie Buyer’s Choice) it starts out like a normal term loan. Where it differs, though, is the option to sell the car back to Ally after four years at a predetermined price. If the customer can get a better price, he or she has the freedom to do so, or to simply keep the vehicle and make the payments until the loan is paid off. Trading in the car at any point is no problem.
Ally Bank’s ABC program is unique in that it offers car buyers complete flexibility. How often have customers started out with a lease, only to like the car and want to keep it but then face a myriad of additional fees and hassle to make the change? It makes total sense to get set up with financing such as this before heading off to the lot to look for that new car.
The Ally Bank website shows consumer ratings. Two things stand out: the high number of ratings (well into the thousands) and the high average — consistently over four out of five stars. Not too many banks have the courage to put up unfiltered consumer ratings.
Most online banks offer live customer support during business hours — Ally Bank sets itself apart by offering access to live customer support 24/7. The toll-free number appears at the top of virtually every page. (Auto loan operators are not available Sundays.)
The Money magazine award and the high rate of satisfaction visible in the customer reviews show that Ally Bank is going to be hard to beat when it comes to customer service. The “extra mile” in their checking and CD offerings, and the innovative flexibility of their ABC auto financing program, make Ally Bank a formidable competitor in the online banking arena.
Mutual of Omaha has been a well-known player in the insurance industry for more than a century. In 2007, Mutual of Omaha created an affiliate company, Omaha Financial Holdings, Inc., (OFHI) to explore the banking sector. Omaha Financial Holdings, Inc., opened with $700 million in assets and 13 locations by acquiring three community banks — Nebraska State Bank, Security Federal Bank and Peak National Bank. Now, Mutual of Omaha Bank has grown to 49 locations serving clients nationwide — and they also offer online banking.
Mutual of Omaha Bank offers a wide range of financial products — checking, savings and money market accounts, certificates of deposit (CDs), health savings accounts and retirement accounts. They also offer credit cards, mortgages and wealth-management services. Their online banking services are highlighted in this review, but it’s important to know that the web addresses for the branch banking network and the online bank are differentiated only by adding an “e” to the online bank’s URL.
There is a checking account offered online and a suite of checking products offered at branches. The online checking account can be opened with a minimum balance of $100. Since everything is handled online, eStatements, online bill-pay, and online account transfers are all free. You can even earn interest on a balance over $1,500. The online checking has no monthly maintenance fee so it is considered “free checking,” although there are some fees assessed for things like account research, stop payments, and dormant accounts. Accounts are fully FDIC-insured up to $250,000 per account.
The features of the checking account at Mutual of Omaha’s brick-and-mortar branches depend on your state. For example, for the state of Oregon, the only checking account available is the Online Advantage Checking. If you live in California, there are six different options — Online Advantage checking, Advantage checking, Basic checking, Classic checking, Investment checking and Platinum checking. The minimum deposit required to open an account and to avoid the monthly maintenance fee is $100. Direct deposit, bill pay, eStatements and online banking services are free. For all the products, other than the Investment and Platinum checking, the first box of checks is free; after that, you will pay $6.95 for each box. As with the online checking account, if you maintain a balance of at least $1,500 in your branch checking, your balance will earn interest.
Money market account
There are two money market products: The online money market account is available for everyone; but in selected states, they also offer a premier money market account through their branches. The minimum balance for opening an online money market account and to waive the monthly maintenance fee of $10 is $5,000. A premier money market account offered at a branch requires a $1,000 minimum balance. You can earn the best interest rate with an online money market account.
You can open a savings account at a branch (available in selected states) with a minimum deposit of $100. If you maintain a minimum balance of $100, there is no maintenance fee; otherwise the fee is $3 monthly. Interest is compounded daily and paid monthly. Accounts come with free eStatements and bill pay as well.
Certificates of Deposit
Mutual of Omaha offers a variety of certificates of deposit with terms starting from 30 days to five years at their branches. The minimum deposit for opening a CD is $1,000. They have two different CD products — the standard CD and a ladder CD. The standard CD is the most common single term CD. For the ladder CD, four certificates of deposit are opened with initial maturity terms staggered at three, six, nine, and 12 months. A minimum opening balance of $2,500 is required for each CD. The current rate of interest for a 12-month CD will be applied to all four of the CDs. Each CD will renew for a 12-month term at maturity.
Health Savings accounts
Also offered at branches, a Health Savings account helps you save and pay for eligible medical expenses tax-free. They can be opened and maintained for free with a minimum balance of $100. If your balance falls below $100, you will be charged a $2 maintenance fee per month. ATM card, online banking, eStatements and up to 10 withdrawals per month are available for free with this type of account.
Retirement & Education accounts
Mutual of Omaha Bank offers traditional, ROTH and rollover-IRA products for retirement and a Coverdell IRA for education. Any of the saving vehicles — savings account, certificates of deposit, a money market account or a combination of these — can be used as the investment vehicle. The standard limit set by the IRS for each of these accounts applies.
Customer service hours depend on the type of product. For online banking and the deposit accounts at branches — checking, savings and money market — help is available Monday through Friday, 7 am to 7 pm Central, and Saturday, 7 am through noon Central. For credit card products, customer service is available 24/7. The service representatives are friendly and I was able to get through to talk to a real person with minimal waiting. In addition, they offer free access to a large, nationwide network of ATMs.
Mutual of Omaha’s products are generally competitive with other online offerings. If you are looking for a well-established, stable bank with a long history, give Mutual of Omaha Bank — and their online bank — a good look.
Banking in America is unique. No other country has as many banks, and types of banks, as the United States. Most countries in Europe have about four or five big banks… and that’s it. When there are so few competitors, they all tend to be alike, and not all that consumer-friendly.
The plethora of banks in America is good news, but the news is not all good. How do you know which banks, among the plethora lining your Main Street, are worthy of your business? CNNMoney (there is no magazine anymore) ranks banks in America annually, and they released their 2013 rankings last month.
The diversity of banks in America makes it almost impossible to pick a “best in show” kind of overall winner. CNNMoney therefore breaks the surveyed banks into several categories. Here’s a quick summary of this year’s top rankings:
- Best savings account: GE Capital Bank and Barclays.
- Best online bank: Ally Bank
- Best big bank: TD Bank
- Best customer experience: Citizens Bank
- Best mobile app: Chase
- Best midsize bank – part 1: Capital One
- Best midsize bank – part 2: Susquehanna Bank
- Best midsize bank – part 3: Zions Bank
- Best midsize bank – part 4: Bank of the West
- Best military bank: Navy Federal Credit Union
- Best checking account: Ally Bank
- Best teen and college student checking: Citibank and US Bank
- Best checking for established businesses: Capital One
- Best checking for start-ups: PNC
- Best 12-month CD: GE Capital Retail Bank and Ally Bank
The category internet-savvy consumers are probably most interested in is Best Online Bank, and Ally Bank garnered CNNMoney’s top ranking for the third straight year. Considering how competitive the cyberbanking world is becoming, that is no mean feat. Ally Bank also had the top rating for checking accounts and tied for the best savings accounts. One reason for that, certainly, is because the interest rates they offer are consistently among the highest. But then again, the mere fact that they have live reps, 24/7, something not seen in many other banks of any description, is another draw. Not mentioned is the fact that they’re also the nation’s oldest and largest lender for auto loans.
A snapshot like the one above gives you a good idea of current standings, but what’s even more helpful is to observe changes. Which banks are survivors, new arrivals, and which have quietly slipped from the peak?
Most top-ranked banks from last year are, as you might expect, at the top again this year. However, few segments are as competitive as the second-tier banks, commonly called regional or midsize banks. That competitiveness shows in two ways:
- It is the only category that produced a tie — there was a tie among four banks both last year and this year.
- Competitive pressure has brought three new banks to the top this year. The sole survivor from last year was Zions Bank, a regional bank in Utah and Idaho.
Edged out were:
- M&T Bank (Atlantic Seaboard)
- First Citizens (scattered loosely all across the country)
- Huntington Bank (scattered in a band from West Virginia to Michigan)
Their places were taken by:
- Capital One (thanks to its purchase of ING Direct’s U.S. operations from its Dutch parent, rebranded as CapitalOne 360)
- Susquehanna Bank (240 branches throughout the Mid-Atlantic region, formerly Farmers First Bank)
- Bank of the West (700 branches, primarily in the West and Midwest, a subsidiary of BNP Paribas, the fourth largest bank in the world)
National surveys like this are helpful for many reasons. One of the most important of those is that it provides a benchmark to use when you evaluate your own bank. With competition this fierce, it can pay to evaluate banks more frequently and a tool like this gives you good and solid information to make an informed judgment.
And, should you feel the need to make a switch, CNNMoney’s ranking is a handy starting point. Capital One’s takeover of ING Direct happened just about a year ago, and the internet chatter surrounding that event has prompted many to look around to see what else is available.
Look no further.
(You can find the CNNMoney article at “The Best Banks in America.”)
It’s that time again, time for the inevitable turn-of-the-year vows to eat smarter, exercise more and be nicer to friends and family. One in a hundred may actually keep those commitments and become healthier, better people in the process.
Others may focus on becoming financially healthier, promising themselves they will look harder for the best credit cards, or the best savings accounts available to them.
But here’s one line item not enough folks are including on their list of resolutions: making a long-term financial plan. According to a recent study, 84 percent of respondents indicated they had no intention of including financial planning in their 2014 resolutions. That’s a woeful 16 percent, and it looks even more pitiful next to the one-third of respondents in the survey’s first year, 2009. If they’re not crafting plans in the dozen months ahead, why not?
Well, a portion of those folks already have financial plans, and they deserve a hearty round of applause. But among those who said they wouldn’t be creating a financial plan and apparently don’t already have one, almost a third reported they believed they don’t earn enough money to justify penning such a document.
Many others may feel a plan is not as important now that they have adopted better money management habits than they displayed a few years back. But does progress in saving money or reducing debts mean a plan’s not necessary?
No, say experts. Even though it’s great that many Americans are becoming more disciplined with their money, discipline alone won’t take them nearly as far as having a sound financial plan directing how that money will be used.
Would you head out your driveway on a family driving vacation to an as-yet-unvisited spot without any kind of road atlas? Would you prepare a complex new dish without benefit of a recipe? Would you tackle a tough assignment without gaining a little direction first? Those are all accepted means of getting started on an endeavor. But somehow, many people expect to fund retirements, pay for college, gather an emergency reserve and more without financial plans.
Reasons to plan
According to a recent article in Forbes, comprehensive financial plans aren’t just for the richest Americans, they’re for all Americans. In fact, financial plans are one way of moving from everyman, working stiff status to the moneyed classes.
As well, the creation of a financial plan isn’t only for older, more established folks. People in their 20s or even younger should create financial plans to ensure they make smart financial decisions throughout their working lives, and continue to make the most of their earnings and savings right up to and through retirement.
As the Forbes article noted, the sooner you know the goals you want to reach, the more targeted, and therefore beneficial, your financial plan can be.
Financial plans can help you zero in on your financial objectives, determine whether those objectives are attainable within the desired time period, assist you in analyzing your spending to maximize your cash flow, force you to identify where you are making personal finance errors, enable you to track your progress from year to year in saving or reducing debt, show you places to maximize your income that you may not be recognizing, help you understand where you may be taking on more risk than you desire and enable you to feel more confident and in control of your finances. The likely result of all these benefits will be greater financial resources and a substantially higher quality of life.
Setting an example
While many adults will again fail to formulate a financial plan this year, the same cannot be said for a growing number of high school junior and senior year students taking part in a groundbreaking Pittsburgh personal finance program.
Created by Junior Achievement, the CFA Society of Pittsburgh and Gene Natali, Jr., co-author of The Missing Semester, a personal finance book for teens, the program requires students to craft five-year financial plans for themselves.
The plans must address their preferred career choices, identify the college programs they believe will prepare them for those careers, and delineate how they anticipate funding their educations through savings, student loans, scholarships and other means. The goal is to catch most of the students before they choose a college, because the choice of a college can have a dramatic impact on their personal finances going forward.
Making the grade
To ensure they get solid feedback, the students’ financial plans will be reviewed by University of Pittsburgh and Duquesne University business students. One of the University of Pittsburgh professors whose students will critique the plans requires students in some of his classes to create their own financial plans, and bases a portion of their grades on the quality of those plans. The benefit, he says, is getting students to focus early upon a skill many never master.
What a concept. If more schools got students involved in making financial plans at very young ages, we might start turning out generations of people actually equipped to deal with money choices after they leave the halls of academe — people no longer planning to fail because they’d failed to plan.
We are right in the middle of the engagement season. According to the wedding planning website theknot.com, 39 percent of weddings begin with a proposal between Thanksgiving and Valentine’s Day. Everyone wants to buy the perfect ring. Being one of the most expensive purchases we make in our life, it is important to plan ahead and understand the process. It will make both the recipient and your wallet happy.
Before you head out ring shopping, it is important to sit with your loved one and talk about finances if you have not done so already. Not about the ring, but in general. Do you and your significant other have similar goals when it comes to finances? Do you have personality clashes? Do you know what her expectations are when it comes to big purchases?
PLAN YOUR PURCHASE
Based on all the information you have so far, start planning your purchase.
- DO start with a budget.
- DO save before you buy.
- DO figure out your future wife’s taste.
- DON’T follow any rules of thumb.
- DO consider your lifestyle and job. If, for example, your future wife is a nurse, doctor or someone who has to wear gloves constantly, any high setting will tear the gloves. She will not be comfortable wearing that ring. She might prefer a low setting that she can wear every day.
- DON’T think of it as an investment.
- DO consider options other than diamonds.
DECIDE ON THE STONE
Diamonds are traditionally the common stone for engagement rings, but other gems have become quite fashionable in recent years — enough to give diamonds a run for the money.
Alternatives to diamonds:
- Moissanite: This is one of the most brilliant alternatives to diamond. It is nearly colorless, just like most diamonds. Next to each other, the moissanite looks better and more fire-y than a diamond. It is more durable and resistant to abrasion than a diamond, which is great for an engagement ring. And it is a lot more affordable:
- 1 carat ideal cut, I-color, VS1 — approximately $5,500
- 1 carat equivalent moissanite — approximately $300
- Colored stone: If you are not set on a colorless stone, colored gemstones like rubies or sapphires are popular alternatives. You can get a stunning stone for a fraction of the price of a diamond. You can make it personal by getting an engagement ring with your girlfriend’s birthstone.
- Heirloom: Before going ring shopping, check with your own and your girlfriend’s family to see if they have an heirloom diamond that they would like to give her. This could provide you with great value and a priceless sentimental piece.
KNOW THE 4Cs
Carat: Carat is the standard unit of measurement of the weight of a diamond (1 carat = 1/5 gram). This is the term most people are familiar with when they talk about diamonds. So size matters, but bigger is not always better. Think about your budget and size of her hand. A big diamond might look odd and be more of an inconvenience.
Money Saving tip: If you want a 1 carat diamond, consider 0.98 carat. Diamond prices jump at the full and half-carat weights. You will save quite a bit of money and won’t notice any difference.
Cut: Cut is the most important characteristic in a diamond. The diamond’s cut determines its fire and brilliance. A well cut diamond will have more sparkle and shine brighter than a poorly cut diamond. Even if you buy the biggest rock with exceptional color, if the cut is poor, it will look like a cloudy cubic zirconia. Pricescope offers a free Cut Adviser tool, which can also be extremely helpful in evaluating the quality of the cut.
Clarity: The clarity of the diamond deals with how many imperfections can be seen in a diamond. The clarity is categorized from flawless (FL) to included (I). For most people, buying a diamond with no obvious flaws (that doesn’t require a microscope to see) would be good enough. Typically, people go for small inclusions (SI) to very very small inclusion (VVS).
Money Saving Tip: Most of the time small inclusions and very small inclusions offer great value as they have inclusions but usually require a microscope to see them. Also, if the (SI) inclusions are near the prong, you can’t really see them and you can get them for less than VVS diamonds.
Color: The color is graded from D (colorless) to Z (yellow). Most people prefer colorless, but you can’t differentiate G from D with the naked eye. So G to J is the preferable range.
Money Saving Tip: Diamonds graded H & I provide excellent value, and you can’t really see much difference with the naked eye.
MORE Cs TO CONSIDER
Cost: Stick with your budget. Don’t get emotionally attached to any ring, and don’t rush. Take your time to research and find the best value for your money.
Certification: Gems certified by Gemological Institute of America (GIA) or the American Gem Society Laboratories (AGSL) are the most popular. A certificate guarantees the 4Cs of the diamond along with some other characteristics like dimensions and polish. Certified diamonds might cost a little more, but it will help you avoid getting scammed. Also, avoid “internal” certifications — the diamond that is certified by an “in-house expert” doesn’t mean much of anything.
UNDERSTAND THE BUYING PROCESS
Do not go into a store without reading up on all of the above online. The jargon can get pretty confusing and you might be talked into buying something that is not worth the price. After you are armed with all the knowledge, pick a few options that you want to see and then go to the store. Even if you decide to buy online, go look at the type of diamond you want to buy in a store to make sure it lives up to your expectations.
Time-saving tip: If you feel all this is too much and want to go see/buy something right there, go to Costco. They have the best engagement ring for the price.
If you have questions along the way, Pricescope is the best place to ask. You can see what other people got and for how much, how they went about deciding and ask questions if you are stuck. They offer a lot of other resources and a great search engine to find wholesale diamond sellers with reviews. Narrow down the 4Cs based on the price and your taste and start searching for the sellers.
How to buy the diamond
After you have the diamond you like and the store you would like to buy from, email the store and ask for the GIA certificate. If you are satisfied with that, you can go ahead and buy the diamond. Check if they will reduce the price if you pay in cash. [Note: When I buy anything this expensive, I will use a credit card for my peace of mind. But paying in cash can save a big chunk, so decide based on the seller's reputation and your instinct.]
After you buy the diamond, take it to an independent appraiser and do another appraisal to make sure the diamond you bought matches the GIA certificate. If your diamond doesn’t have the GIA number inscribed, you might want to make an appointment at the nearest GIA and get it inscribed. If you lose the diamond in the future and someone tries to sell it, this number ties this diamond to you and you can get it back easier than otherwise.
Where to buy the setting
Some people prefer to buy the diamond and the settings separately to save money or to get a custom look. You can find a setting your like at the Tiffany’s website and get it made at your local jewelers for a fraction of the cost.
You can buy the setting online as well, but before you do that consider:
- How much it will cost to service. Most local jewelers will service your ring for free for many years as part of the purchase.
- How will you make any adjustments?
You can always buy the complete ring; the process will still be the same.
OTHER TIPS TO KEEP IN MIND:
- Don’t believe everything the seller says. Always check.
- Know the refund policy of the seller.
- Don’t buy it from a fancy mall store.
- Don’t forget to add a rider to your home owners/renters insurance policy after you buy the ring.
Have you been through the diamond-buying process? What is your experience? How did you get the best ring for your price?
This post comes from Miranda Marquit at our partner site Quizzle.com.
One of the biggest complaints that many have about the credit reporting industry is the fact that consumers have little choice but to engage in activities that can result in high interest debt if they want a good credit score.
While it’s true that the point of credit scoring is to ascertain the way consumers use credit, the reality is that credit scores are being used for more than just loans. Now, credit scores are being used for non-loan transactions, including setting insurance premiums, the way landlords determine security deposits, and even the terms on which consumers can get Internet and cell phone service.
Since credit scoring is becoming a part of everyday finances, some consumer advocates believe it makes sense to include non-loan payments, such as utility payments, in credit scores. In order to move toward this goal, legislation has been introduced in Congress, designed to amend the Fair Credit Reporting Act.
H.R. 2538 and S. 1613
There are currently two bills addressing the issue of including utility payments in credit assessments, one in the House of Representative and one in the Senate. Both bills have been referred to committee, and there have reports on neither so far.
Both bills aim to amend the Fair Credit Reporting Act to allow for positive reporting of utilities in credit files. Right now, it’s possible for negative information to be reported, but positive information doesn’t affect the outcome of your credit situation. The Senate version of the bill is more comprehensive, but both would have the effect of making your regular telecommunications and utility payments reportable.
How This Bill Could Affect You
“The biggest benefit for consumers under the proposed bill is that utility and telcommunications companies will report positive consumer data to the reporting agencies,” says Xavier Epps, a personal finance expert and owner of XNE Financial Advising, LLC.
This positive data could impact a consumer’s credit score, and provide another measure of possible creditworthiness, without the need for a consumer to get a loan or use a credit card. For consumers that are wary of credit in general, but still want access to good rates on a mortgage, or who want to see savings reflected in their insurance premiums, this could be a step forward.
“The segment of consumers who have a relatively short credit history, but many years of living on their own, could see a bump in a credit score,” Epps says. “This segment includes consumers ranging in age from 21 to 30. This would allow them to receive credit and save money on interest payments.”
Because credit scores help set interest terms, being able to use positive utility and telecom payments could mean substantial savings on car loans and mortgages for consumers just starting out their lives.
“The only issue that would need addressing is the frequency of updates from various companies,” says Epps. “Consumers can quickly go from being on-time with payments to being a month or two past due. At this juncture, does the consumer experience volatile swings within their credit score?”
Harrine Freeman, CEO of H.E. Freeman Enterprises also sees some of the advantages associated with folding utility and telecom companies into the Fair Credit Reporting Act. “Companies will have to abide by federal consumer laws, and consumers will be able to file complaints against companies that violate this law,” she says.
However, there is the other side of the credit reporting coin to consider as well. “If accounts are paid on time, it will help to increase consumer credit scores,” Freeman says. However, if accounts aren’t paid on time, especially if the Senate version is passed, consumers could see some negative impacts.
“Currently, if a bill is not paid, service is terminated and consumers are not usually take to court for unpaid bills,” Freeman says. “If the bill is passed into law, companies will be able to take consumers to court.” It might even result in utilities and telecoms being included in bankruptcy proceedings, although that might be a stretch.
The Senate version of the bill could also move up the timetable for reporting late accounts. “Currently, if an unpaid utility or service bill is 30 to 90 days late, it may not be reported on your credit report. If the law is passed, companies will be more inclined to report utility or service bills 30 days late,” Freeman points out.
Will the Bill Be Passed?
Few bills actually make it out of committee, and even fewer are passed. Govtrack.us, a site that follows legislation, gives the Senate version of the bill a 3 percent chance of getting past committee, and a 1 percent chance of actually being enacted. The House version of the bill has a better chance, with a 27 percent chance of getting out of committee and a 7 percent chance of being enacted.
As with all things credit, including utilities and telecom payments in your report depends on how you handle your finances. If you make your payments on time and in full, you could benefit from the added boost this addition to the Fair Credit and Reporting Act would have. If you struggle to pay your bills, the addition of more companies to the mix would only drag you down faster.
If you are interested in influencing the progress of this legislation, you can contact your representatives. You can find them at Congress.gov. You can also contact the Federal Trade Commission to weigh in with your consumer concerns.
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Twenty-thirteen is the year the Haves and the Have Nots came to prominence, dressed up as a new TV series which opened on the Oprah Winfrey Network (OWN). The title of the show alludes, of course, to the notion that there is a distinction between those with high incomes and/or a high net worth, and, well, the rest of us.
The Haves are also known as “the 1 percent,” and the Have Nots, in the wonderful math of rhetoric, “the 47 percent.” The unnamed mass in the middle, well, nobody talks about them. There may be a good reason: The American middle class appears to be following the path of the dodo. America is in the midst of a disturbing trend, a growing gulf between the haves and the have nots.
It’s not just rhetoric. There is a statistic measuring the gap, called the Gini coefficient. The Fed actually tracks it, so you know it’s not a trivial thing. Like all statistics, it’s not perfect; but, viewed over several decades. it gives you a good idea of whether the gap is widening or narrowing. Check it out for yourself (click to enlarge):
The chart reflects what we all suspect: Spreading the wealth among all income groups was part of America’s “golden age” after the Second World War, reflected in a dropping Gini number. However, since the seventies, the rise in the Gini coefficient shows the growing gap between the haves and the have nots.
Why bring this up? As we start 2014, this dynamic carries a big threat to you if you ever considered yourself part of the middle class.
The economic cycle
Everyone knows the economy moves in cycles, where good times are followed by recessions, which in turn are followed again by more good times. Over time we’ve become accustomed to certain signs that characterize the various phases of the economic cycle. One of the more unmistakable characteristics of the “good times” has been the prevalence of ridiculous prices for things with no practical use — stuff like art, collector cars, fashions, second homes, etc. The Roaring Twenties, which preceded the Great Depression, is a particularly famous instance of what former Fed governor Alan Greenspan termed “irrational exuberance.”
Whenever you see irrational exuberance, you know the next recession is around the corner. After a recession, there’s usually a period of slow recovery as jobs come back, people recover and get back to “normal” (however that looks from person to person). Although all income levels never shared equally in the wealth in the past, they usually experienced the good and bad times together. We’ve never had something like the Roaring Twenties while an inordinate portion of the nation were still looking for jobs.
Smart people understand the ebb and flow of the economy and take their cues from the signs of the shifting seasons. When a recession arrives, they’re prepared and ride it out, scooping up the bargains only found in times of recession, building their net worth over the long haul, regardless of the economy.
Ever since the bottom of the last recession in 2009, the economy has been running on two diverging tracks. The stock market has recovered smartly and hit several new record highs in 2013. A visitor from Mars would call that a nice and healthy recovery — it’s been four years since the last bottom, so the economy must be in high growth mode.
The unemployment situation shows everything but a robust recovery. Look how long employment is taking to recover this time around, compared to previous recessions (click to enlarge):
The middle class is still in the early recovery phase of the economy… but the 1 percent are hitting their stride with their irrational exuberance. Want evidence? Just over a month ago, someone paid $142 million for a piece of art, a new record. During 2013, multiple new records were set at collector car auctions. And we’re seeing that old sign of too much money: the reappearance of multiple $100 million houses. All while unemployment just can’t get below 7 percent (and we all know that number is understated).
The Fed is faced with a dilemma: Should it respond to the bubble markets in rich-person trinkets, which point to inflation and the need for tightening up? Or should it keep pumping in even more money in hopes of creating more jobs and prosperity for the middle class?
In probably his last address, Ben Bernanke said they’ll keep pumping.
Therefore, in 2014, you can expect to see more income growth for the middle class, even if it’s not as exuberant as for the 1 percent. You can expect your 401(k) plan’s value to keep climbing as it did last year.
But beware. Winter never comes suddenly. You get a coldish snap in the fall, and then it goes away, replaced by more seasonal weather. Then, a few weeks later, you get another cold snap, this time a bit longer and a bit colder. Then seasonal weather returns. As time passes, the cold snaps come quicker, last longer and get colder. The shift to winter is always gradual.
You’ve just witnessed the first cold snap for the next recession. The actual recession may be two to three years away, but there’s no question that, having passed the halfway mark, we’re closer to the next recession than the previous one.
What should you do?
- Make hay while the sun shines. Grab every opportunity to get extra income. These opportunities will dry up again, just like they did in the previous recession.
- Delay all “upgrade” type of purchases. Don’t be fooled by your current income — you don’t know if or when it might go down.
- Do not take on new debt under any circumstances.
- Pay off whatever debt you have.
Chances are 2014 will be a good year by all measures. Take full advantage, but don’t be lulled into thinking these good times will last forever. They never do. Forewarned is forearmed.
Happy New Year!
I have a brother who is a history teacher, and a son who is on his way to becoming one. For me, history was one of my least favorite subjects in school, but now it represents a major portion of my reading. Studying financial history early in my career may have been the turning point.
When I was in my 20s and just starting my investment career, I familiarized myself with the financial markets by looking at decades of history. What amazed me was that prevailing opinions about how stocks, bonds, and money market accounts behaved often did not account for some of the extremes — or even some of the norms — seen in past decades.
History does not repeat itself in an orderly manner, but it is valuable to tell you what financial markets are capable of doing. The more you appreciate just how broad a range of returns and risk the past has seen, the less you are surprised by new twists and turns.
The reality, though, is that people are most influenced by their recent experiences — especially when those experiences have fallen into a pattern over several years. The following are some of the major eras that the economy and markets have seen in recent decades, with a discussion of the popular mindset that resulted from each.
- The cynical era (1973 to 1981). Between Watergate and Vietnam, there was plenty to be cynical about in this period. Economically, this was the era of “stagflation,” a poisonous combination of a stagnant economy and soaring inflation. For investors, it was a time when S&P 500 stock prices climbed a total of 3.8 percent in nine years — and that’s a cumulative return, not an annualized number. Bond prices sank as long-term yields soared from 5.96 percent to 13.73 percent. Consumer prices, meanwhile, more than doubled during this period. The natural reaction was that investing was a loser’s game, because inflation would exceed the return you got on your money. And yet, the truth is that by the end of this period, stocks and bonds were poised for long-term bull markets.
- The “greed is good” era (1981 – 1990). Investment returns didn’t just get better in this period, but investing became sexy. Modern robber barons like Michael Milken and Ivan Boesky made magazine covers — as Wall Street heroes at first, before they made headlines again for crooked investment schemes. There were some huge gains on stocks during this period, but also sharp downturns in 1987 and 1990 that taught bandwagon investors a painful lesson.
- The spoiled rotten era (1991 – 1999). This was an era when stock prices soared and the unemployment rate steadily dropped, reaching just 4 percent by the end of 1999. Those are good things, but they encouraged some bad habits. Retirement investors — from individuals first learning their way around a 401k plan to large institutions that should have known better — got so used to high returns that they slacked off on contributing to their plans. Meanwhile, a generation of college graduates got used to being wooed by employers plying them with signing bonuses, and never learned to deal with the harsh realities of searching meticulously for a job, being willing to work their way up, and focusing on adding value. The era that followed was to teach both investors and many employees that the world isn’t usually as giving as it was in the 1990s.
- The lost era (2000 – 2009). From the end of 1999 through the end of 2009, stock prices declined by more than 20 percent while the unemployment rate soared from 4 percent to around 10 percent. As a result, for many Americans this was a lost decade for both retirement saving and investment returns. Some compounded the problem by turning from the stock market to even riskier alternatives, such as real estate, oil futures, and gold, all of which would go through a boom-then-bust cycle.
- The low interest era (2010 – 2013). Recent years have been great for borrowers but terrible for savers, as interest rates have plunged to record lows. Longer term, though, people who learned to save despite minimal interest incentives will be better prepared for retirement, and if interest rates finally start to rise — signs of which began in 2013 — they might finally be rewarded for those savings. Stocks though, which recovered spectacularly during this period, might find it heavier going in competition with rising interest rates.
What each of these eras had in common was a set of economic and financial market conditions that came to dominate the public mindset, after which conditions changed drastically. This underscores the importance of basing your financial decisions on more than just the most recent few years of experience. Consider the range of different conditions represented by the above eras, and be sure to keep a watchful eye on the future in addition to being mindful of the past.
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