Hedge fund activity currently constitutes approximately 30 percent of all equity trade volume. So if you have any experience with equity trading, or even a slight interest in this type of venture, then you’ve probably been tempted to get involved with one of these notorious private investments funds. And make no mistake, hedge funds and those who run them have made a name for themselves in recent years.

Hedge funds have been all over the mainstream news media of late, whether it’s due to huge successes, shocking defeats, or the way that their managers seem to treat billions of dollars as if it were Monopoly money.

Hedge funds are private by definition and only certain investors qualify to partake in them. If you’ve climbed your way into this category as a result of a strong record in equity or futures trading, you might feel compelled to throw your money in with the über-rich, thinking that it’s a sure way to become one of the elite. But be warned, hedge funds are not all that they are cracked up to be. In fact, for an educated and conscientious investor, hedge funds can be a nightmare.

These four curious characteristics of hedge funds make them different than many standard investments. If you don’t bat an eye at this list, then go for it and you’ll at least enter the fray with your eyes wide open. But if anything in this description of hedge funds surprises you or makes you the least bit uncomfortable, then it might be best to stick with what you know.

1. Lack of oversight:
The SEC does not require a private investment fund to register with them or any other regulatory body if it is comprised of fewer than 100 investors. Combine this with these funds’ tendency to lean heavily on offshore investments and hedge funds are operating in a virtual vacuum. While too much government oversight can hamper the performance of an investment vehicle, too little means that the people handling your money aren’t accountable to anyone, including you.

2. Managers with little to lose:
When investors are invited to contribute to a hedge fund, the manager sets a high-water mark for returns. If your manager meets this goal, he will retain a full 20 percent of your returns, in addition to the couple of points in assets that he is already collecting on an annual basis. And what happens if your fine manager doesn’t meet this lofty goal? With all that he has to gain, failure must destroy him, right? In fact, you and your fellow investors will eat all of the losses and your manager will merely move on and set up shop somewhere else, none the worse for wear.

3. Totalitarian mindset:
When you invest in a hedge fund, you are putting your assets entirely in the hands of one single person, and that is a dicey proposition any time that that person isn’t yourself. The manager of the fund makes all of the investment decisions that determine the success or downfall of the fund, and even a manager with a great track record is fallible. If your manager gets in a fight at home or catches a flu bug, your portfolio could suffer. Worse yet, if your manager steps down and hands the reigns to someone completely new, you and your fellow investors could be in serious trouble

4. Short life spans:
The average life of a hedge fund is only three years, which means that employing this vehicle is unwise if you have a long-term strategy in place. One out of every ten hedge funds collapses each year, making this industry as volatile as almost any other venture out there. An investment with such a short shelf life might not be the way to go if you are a typical investor who has the long haul in mind.

For millions of Americans, fixed annuities provide safety of principal, tax deferral and higher rates than those offered by banks and other traditional savings institutions. However, one disadvantage inherent in most fixed annuity products is their inability to keep up with inflation over the long term.

For example, assume that you invest $100,000 into a single premium immediate fixed annuity. A current contract from a major carrier would then pay out $658.59 per month, for a total of $7,903.08 for the year. The problem is, if the rate of inflation is 3%, then the purchasing power of these payments will decline from one year to the next. Obviously, $7,903 will not buy in a future year what it can now.

One way that annuity investors can deal with this problem is to purchase a cost-of-living rider on the contract. This rider is designed to ensure that the income from the annuity stays abreast of the rate of inflation over time. For example, the same SPIA contract with a 3% inflation protection rider will only pay $499.06 per month initially. But this amount will increase by 3% each year for the duration of the payout, thus providing some protection from inflation. Of course, it is plain to see that there is a cost to this rider, as the initial monthly payment is $159.53 less than the contract without the COLA rider. However, if the annuitant should live long enough to receive payments for the next 20 years, then the payment by year 20 would be $901.36 per month, or $242.77 per month more than the straight-life contract payout.

COLA riders can come in different forms, with some riders having a specific cost, while others (such as the one shown above) merely affecting the dollar amount of the monthly payout. Different rates of increase are also generally available, depending upon how much inflation protection the contractholder desires. For example, the contract shown above also has a 6% inflation protection rider option, which would result in the contractholder receiving a proportionately lower payment each month to begin with, and a higher payment at the end of the term.

A certificate of deposit that is issued in a U.S. market by a branch of a foreign bank. Most Yankee CDs come from New York. Yankee CDs are negotiable with a minimum face value of $100,000. As a negotiable certificate of deposit, a Yankee CDS is guaranteed by the bank and can be sold in derivative markets. They are usually bought by large investors as a low-risk, low-interest security. Yankee CDs usually cannot be cashed in before their maturity.

Like most Americans with assets that they intend to leave to their heirs, you have worked hard to accumulate what you have. And while you can feel good about leaving your designated heirs with a financial legacy, you may have some reservations about their ability to use their inheritances wisely. One way that you help them to make the right choices is by establishing an incentive trust. This type of trust can provide financial rewards to your heirs for accomplishing certain objectives that you consider beneficial.

An incentive trust resembles other types of trusts in many respects; it is established and funded by a grantor. In this case, the grantor is usually an older member of the family who wishes to pass on some or all of his or her wealth to younger family members-as long as certain goals are achieved. This type of trust can also make specific provisions regarding distribution of trust assets to beneficiaries.

As stated previously, the main advantage of an incentive trust is that it allows the grantor leverage to either financially reward or punish the behavior of the trust beneficiaries, within broad legal limits. Conditions such as age, education, lifestyle choices and employment are fair game in terms of criteria for this type of trust. For example, an incentive trust can restrict access to its assets to family members over age 25, or increase access for those who get a college degree. There could be a reward for carrying on a family business, or achieving some other personal or professional goal. Conversely, destructive behaviors, such as gambling or drug addiction can cut off trust assets as well.

However, if not written wisely, these trusts can also present your heirs with problems. Making unreasonable demands of your beneficiaries can lead to resentment and create other problems for them. For example, if the trust will only pay assets to an heir that is willing to continue the family business, then a beneficiary that happens to have other aspirations in life will be faced with what may be a rather substantial dilemma.

The key to successful incentive trust planning is flexibility. Remember that your heirs have their own goals and desires, which may never match up with yours. Choose the criteria for rewards and punishments wisely, and be sure to allow for contingencies such as disability or other misfortunes that could affect your beneficiaries’ ability to achieve the goals prescribed in the trust.

While many older Americans are afraid of the stock market with its risk and volatility, their perception of bonds and other fixed-income securities are often very different. Even though the values of many fixed-income investments fluctuate in the secondary market, the interest that they pay remains constant. Furthermore, the rates on many of these instruments are higher than those offered by banks or other traditional savings institutions.

But many investors are unaware of certain features inherent in many fixed-income securities known as “call” and “put” features. The issuer of a fixed-income security generally uses these features for one of two reasons: in order to either entice new investors or protect the issuer against a drop in interest rates. The call feature tends to fall into the latter category, while put options generally coincide with the former.

In and of itself, a “call” feature is simply a built-in provision that allows the issuer to recall the security and refund the money to its investors at a given window of time in the future (such as five years.) The issuer would do this if interest rates were much lower at the time of call than at the time of issue. For example, if interest rates were to hypothetically drop substantially by the time the call feature window opens, then the issuer will call the security. The logic behind this is obvious: why should the issuer continue to pay a higher rate to its holders when the rest of the market is paying less? Of course, the bondholders will receive their principal back in return from the call, and some issuers may even pay a premium to their investors as well.

Put features represent the other side of the coin. If a security is issued with a put feature, then the investor has the option of “putting” the security back to the issuer either at par or occasionally at a premium. This means that investors would receive not only their principal but a bonus amount as well if they turn the security back in to the issuer. This can protect investors from from being “locked” in to a lower-paying security in a rising interest rate evironment. For example, if interest rates have hypothetically risen by 3% when he exercise window of the put feature opens, then the investor will most likely turn the bonds back in to the issuer. The logic is again obvious. No investor will want to hold onto a bond paying a rate that is less than the prevailing market rate. Of course, having this option makes the bonds much more attractive to investors-and therefore much easier for the issuer to sell.

It should be noted in conclusion that a bond with a call feature will often pay a higher rate than an equivalent security that does not have this feature, and a put option will often lower the rate offered by the issuer on bonds that contain them as well.

The last several years have seen an explosion in the equity-indexed annuity arena, with a growing number of companies offering more and more products in this category. But while these hybrid annuities can provide many benefits to investors for whom they are suitable, they can also pose some risks to those that do not understand them.

By definition, an equity-indexed annuity is currently considered a cross between a fixed annuity and a variable contract. These vehicles allow investors to participate in a set percentage of the gains of the stock market without any downside risk. A minimum guaranteed rate is usually also included.

Of course, there are a great many competent, legitimate agents and advisors who work with equity indexed annuities and match them appropriately with their clients’ needs. Unfortunately, there has also been a growing trend among some insurance agents and brokers to aggressively market these contracts to senior citizens as the only viable investment alternative available to them in these uncertain times. There are also numerous crediting methods used by many different insurers to determine the return on capital for the investor. While this type of annuity can offer higher returns than traditional fixed annuities, it also often contains a number of provisions that investors can find very confusing. For example, many equity-indexed contracts have very long surrender periods, such as 12 or even 15 years. While many of these products contain an initial free-look period that may last up to two years, they can become substantially illiquid once this period has expired. Contractholders that need to liquidate their investment after the free-look period and before the end of the contract term can face early withdrawal penalties of up to a whopping 35%, plus forfeiture of all gains within the contract. However, many companies will now allow investors to withdraw up to 10 or 15% of their contract value each year without penalty.

Prospective investors should carefully consider both the benefits and drawbacks of these complex instruments. While indexed annuities can be an excellent vehicle for some investors, those who may need greater liquidity may want to consider other alternatives.

From simple colds and viruses to life-threatening diseases, any kind of health problem can put a huge strain on your pocketbook. By adopting certain habits you cannot only save money on fewer doctor’s visits and medications, you can preserve your cash in other ways.

Below are eight frugal living tips that will actually lengthen your lifespan.
Click here to read more

For millions of Americans, the choice between term and permanent insurance can be a confusing one. A number of variables factor in to whether one is more appropriate than the other for most consumers, such as debt level, health and longevity, and the size of one’s estate. There are a number of arguments on both sides stating why one is better than the other but in virtually all cases, there are a couple of situations where permanent insurance is usually the best choice.

One situation where permanent, or cash value insurance may be best is when there is a real chance that the insured or potential insured may become uninsurable in his or her later years due to health conditions. This is particularly true for those with estate tax issues that generally require life insurance to recify. For example, high net-worth individuals or couples may need to establish life insurance trusts in order to provide needed liquidity and relief from estate taxes. But this strategy is, of course, predicated on the ability of the insured(s) to pass initial underwriting requirements. And this ability can diminish with age for many consumers, who may have family histories of health problems that have surfaced for other members in their later years. Because term insurance requires its insureds to submit to new underwriting requirements at the end of each term, those in this category may no longer qualify for adequate (or even any) protection that may be vitally necessary to preserve the estate.

Another somewhat similar situation involves business buy-sell agreements. These agreements generally require that each partner in a business to purchase life insurance coverage on each of the other partners, so that when one partner dies, the death benefit from the insurance will be sufficient to buy out the deceased partner’s share of the business for the surviving owners. But again, it is absolutely necessary that the coverage be in force upon death, which may not be possible with term insurance. Therefore, some form of permanent coverage is generally used for this purpose.

Many investors are constantly looking for ways to increase their investment returns, particulary in their IRA accounts. Those who have stock in their IRAs can use a simple option trading strategy to increase the returns they are getting from their stock holdings. This strategy, known as covered call writing, is a conservative way to generate an additional regular flow of income. It is, in fact, the only kind of option trade that is permitted inside an IRA.

Options themselves are considered to be derivatives; that is, securities that derive their inherent value from another security (namely, the underlying stock.) Options always involve two parties, a buyer and a seller. The buyer of a “call” option on a stock believes that the price of the stock will rise, and therefore purchases a call option that will allow him or her to buy the stock at a given price for a given period of time. If the stock price does rise, then the buyer can exercise the option to buy the stock at the preset price of the call, instead of the current higher market price. Then the buyer can turn around and sell the stock at the higher market price and thus make a profit. However, if the stock price does not rise, then the call will eventually expire worthless-and the buyer is out the cost of the call premium that was paid.

Conversely, those who sell covered calls do not feel that the price of the stock will rise; they believe that it will either remain steady or drop. Therefore, they are willing to be paid a premium in order to risk having to deliver the stock for less (perhaps much less) than the current market price. However, since covered call writers already own the stock that they are getting paid a premium to risk delivering, they can simply deliver that stock instead of buying it on the open market at a higher price and then delivering it to the call buyer at the lower option price. Therefore this type of option strategy is considered to be “covered”, because there is no chance that the seller will have to come up with a large sum of money in order to cover his or sale.

If you count yourself as one of the masses that is sick and tired of the daily grind of your mindless job, then getting out and starting your own business is a real possibility. It may seem like a daunting task; but you can get into business on your own with as little as $5,000.

Erase the notion that you need hundreds of thousands or millions of dollars to make it on your own. If you can get your boss (read: spouse) on board then you’re on your way to a liberating experience. Here are some tips for you to get started on opening your own business:

1. You’ll need more than an idea.
Once you’ve created your business model you’ll have to develop the skills necessary to make it in this nitty-gritty world of the unknown. Pure smarts aren’t enough to be successful. You need to rely on determination, guts, tough skin and confidence. You are sure to encounter many roadblocks along the way and you have to be ready to face these head on.

2. Scrape together your dough.
You have to assess how long you can get by with little or no income. Aside from turning into a frugal being, you have to be completely honest with yourself when it comes to your personal finances. Make sure you credit is in good order as this will help you when it comes to applying for bank loans.

3. Cut corners.
As much as you’d want to have a luxurious office you have to be reasonable. Work out of your home and set up an office that has all the amenities minus the rental costs. If you need space for conferences or meetings then ask around friends and see if you can share their space for cheap. Remember you will have to have some face-to-face meetings, so plan accordingly.

4. Make do with what you’ve got.
A new computer system could cost upwards of $2,000 so maybe what you’ve already got could be sufficient. If you need a new system then lease instead of buy.

5. Think outside the box.
There are many ways to be frugal without looking cheap. Search bargain outlets for office materials, scour the internet for deals and just keep your eyes and ears open for opportunities as they come knocking because the best deals aren’t advertised but are found out through word of mouth!

Like most other Americans that are saving for retirement, you probably need to make adjustments in your investment or retirement portfolio from time to time. Of course, making these changes will have tax consequences, unless they happen inside a tax-deferred account or plan.

However, if you own any type of life insurance or annuity, then you do not have this restriction, thanks to the extremely powerful lobby group that the life insurance industry has in Washington. Regardless of whether your contract is inside an IRA or qualified plan or not, the IRS will allow you to move your policy or annuity into another contract without taxation. The rules for doing so are similar to those for IRA transfers or rollovers, meaning that the exchange must be done directly. The owner cannot take constructive receipt of the policy or contract proceeds. Therefore, if you have a life insurance policy that you want to move from one carrier to another, then the current carrier will simply cut a check directly to the new carrier for the amount of the policy.

There is a considerable amount of freedom in how 1035 exchanges can be done. One annuity can be exchanged directly into another, the same as for life insurance. Life insurance can also be exchanged into an annuity contract as well. However, this provision does not work in reverse. The IRS does not permit annuity contracts to be transferred directly into any kind of cash value life insurance. Finally, a 1035 exchange can be combined with new money to create a larger new contract. For example, assume that you have a $100,000 fixed annuity that has come due. If you would like to transfer the contract to another annuity company that is paying a higher rate, then you also have the option of adding more money to the new contract. If you were to put in another $100,000, then that will be combined with the incoming contract to make a single $200,000 annuity. Of course, in this case, if the current contract is contained inside an IRA or qualified plan, then any additional money put into the contract would be limited by the appropriate contribution limits. These rules hold true for fixed, indexed and variable insurance products.

If you are like millions of other Americans, you are working hard to save money for your retirement, and perhaps also to leave a legacy for your heirs. But of course, while any beneficiary is likely to appreciate receiving an inheritance, some beneficiaries are obviously much more capable of managing their money than others. Some beneficiaries may have mental or psychological issues that prevent them from being able to make sound decisions, while others may have debt or other financial issues that could result in seizure of the inheritance by creditors.

There are several ways to remedy situations like this. The most obvious solution would be to establish a trust for an unreliable beneficiary that would prevent him or her from being able to access the principal, or else define other limits for the use of the money. But creating a trust can be expensive and time consuming. There is another alternative that you may want to consider. Many annuity and life insurance companies now provide beneficiary restriction options on their contracts. These options allow policy or contract owners to specify the terms under which their beneficiaries can receive their money. This restriction can be either partial or total, and can come in the form of an arbitrary settlement option, such as straight life or life with period certain. For example, assume that you intend to leave $100,000 to your beneficiary, and he or she has $50,000 of debt that must be paid as soon as possible. If your policy or contract has a restriction option, then you could use that to specify that $50,000 could be paid out in a lump sum, while the remaining balance is converted to a lifetime income stream.

While restriction options cannot be used to create specific customized solutions for beneficiaries on the same level as a trust, they also do not cost anything and only take a moment to complete. The only other real disadvantage they have is that they are not available from every insurance company or with every contract.

If you are like most other Americans that are saving for retirement, then at least a portion of your portfolio is invested in mutual funds. In most cases, this means that you are probably paying some sort of sales charge for your investment. This fee can range anywhere from 2 or 3 percent up to 8.25%, the legal limit for mutual fund sales charges. The average mutual fund company assesses sales charges ranging from approximately 4.25% to 5.75%. However, fund companies are required to offer volume discounts to their shareholders that allow them to pay less for larger dollar investments. These discounts, called breakpoints, are designed to entice investors into purchasing larger share amounts. A hypothetical schedule of breakpoints is shown below:

$0-25,000 – 5.75% sales charge

$25,000 - $50,000 - 5.25% sales charge

$50,000 - $100,000 - 4.75% sales charge

$100,000 - $250,000 - 3.75% sales charge

$250,000 - $500,000 - 3% sales charge

$500,000 - $1,000,000 - 2% sales charge

$1,000,000 and up - sales charge is waived

This hypothetical schedule shows a fairly typical breakpoint schedule for the average mutual fund company. A key issue to remember here is that breakpoints are offered within a single fund family’s entire selection of funds, so an investor who constructs a portfolio of funds within a single company will be eligible for all breakpoint discounts. For example, if someone invests $100,000, $25,000, $150,000 and $50,000 with four different funds offered by the same fund company, then the investor would be entitled to a breakpoint reducing the sales charge to 3%, according to the hypothetical schedule listed above. Therefore, investors must take this issue into account when choosing between various mutual funds to invest in. While cost is obviously not the only issue to consider, it should be taken into account in determining how to allocate one’s portfolio. If an investor wishes to invest in a selection of funds from different fund families, then the portfolio’s expected performance must be enough to offset the higher sales charges that will be assessed versus what the would be paid if the portfolio choices were limited to a single fund family.

For many investors looking for higher returns and portfolio diversification, mutual funds are ideal investments. They offer a combination of professional management, liquidity and reduced volatility that makes them excellent vehicles for both growth and income investors. However, some investors follow simpler investment strategies that do not require active portfolio management, and therefore do not need to pay the high sales charges and ongoing management fees assessed by many funds.

There is, however, an alternative for those in this category. Unit investment trusts (UITs) provide diversification similar to mutual funds, but without the internal portfolio turnover. A unit investment trust is simply a set portfolio of securities that have been selected according to either a specific set of characteristics or perhaps a specific investment strategy. Just as a share of a mutual fund represents an undivided interest in each of the funds’ holdingd, each unit of the trust represents an undivided interest in each of the securities held within the trust. Each trust will hold the securities for a set term and then mature. Upon maturity, the securities in the trust are reset according to the trust’s objective if necessary. The process is then repeated. There are many types of this kind of trust; one of the most common examples of this is UITs that follow the “dogs of the Dow” strategy. The ten highest dividend-yielding stocks from the Dow Jones index are purchased within the trust and held for 13 months. Then the stocks within the trust are adjusted according to this strategy, and a new trust is issued for another 13 months. Because they are not actively managed, UITs do not generate capital gains or losses of any kind, except at maturity. They can pass through interest and dividends periodically, depending upon the investment objective of the trust. There are many different types of UITs that meet various investment objectives, such as growth, income, or sector exposure.

UITs also generally cost less to invest in than actively managed investments. Although most UITs generally have a nominal sales charge, they have no annual expense fees of any kind, due to their passive management. Even their initial fees tend to be fairly low. Many of the trusts that follow the “Dogs of the Dow” strategy usually have an entrance fee of around 1%. Although this fee is charged every time the trust resets, the aggregate cost is still often below that of a comparable mutual fund investment.

Your last Social Security statement contained three key numbers that you may still not know which is best to pick. One number was the benefit amount you will receive at age 62; the second was your benefit amount at your normal retirement age and the third was the amount you will receive if you work until age 70. While there are a number of factors that can affect both the final amount of your benefits and when you should begin taking them, the possibility of coming out ahead by simply investing the money should be examined. If you begin taking early or even normal distributions and invest them, chances are you will come out ahead of where you’ll be if you choose to wait. The following table breaks this down clearly:

Cash flow comparison of Social Security benefits, assuming life expectancy to age 90

However, the information in table 1 is not final, as the amounts from column II and IV must be combined in order to arrive at the correct final comparison. Taxes are not taken into consideration here either, but those who are eligible to make Roth IRA contributions will come out much further ahead of those who cannot.

^{Remember, while the differences in cash flow from the tables above may not seem that large, the growth scenarios at age 62 and 66 produce approximate liquid assets of $136,000 and $78,000, respectively. These are available to the participant for any reason at any time, such as to pay off a mortgage. (Of course, liquidating this balance will have an effect on the amount of benefits ultimately realized.)}

Although the IRS has allowed for tax-free rollovers from one IRA to another or from a qualified plan to an IRA for years, the Economic Growth and Tax Relief Reconciliation Act of 2001 added a new provision: a direct rollover from a self-directed IRA into a qualified plan. This new directive has created several opportunities for IRA holders in certain situations.

Perhaps the main advantage that this provision has created applies to qualified plan participants who have IRA accounts that are partially funded with after-tax contributions. In the event that a distribution must be taken, the IRS will prorate each distribution according to the ratio of pre-tax versus after-tax contributions. For example, if you have $200,000 in an IRA, and $50,000 of its value consists of after-tax contributions, then 25% of each distribution that you take will be taken from the after-tax contributions. The balance will be considered to come from the pre-tax contributions and is thus taxed as ordinary income. This means that if you were forced to withdraw $50,000 from your IRA for any reason, $37,500 of the withdrawal would be fully taxable. However, the new rollover rules under the EGTRRA provision give you a much better option. You could instead roll over $150,000 from your IRA into your qualified plan and simply withdraw the balance from your IRA. The entire balance will be considered a tax-free return of principal. Rolling the taxable portion of your IRA into your qualified plan will effectively allow you to escape the partial taxation of your withdrawal. (Of course, in order to take advantage of this provision, you must be a current qualified plan participant.)

This rollover provision also allows for greater liquidity from your IRA without taking any kind of distribution at all. If your qualified plan permits you to take out a loan against the balance of the plan, then rolling your IRA into the plan will increase the amount that you can borrow, generally by half of the amount that is rolled in. Therefore if you roll $100,000 from your IRA into your plan, then you will be able to borrow $50,000 more out of your plan (such ratios may vary from one plan to another.)

Credit scores seem to be one of the biggest sources of mystery and myth on the face of the planet. They are the financial equivalent of the Bermuda Triangle or Bigfoot. In fact, I would say that it’s the single largest subject I continually hear people give bad advice about.

Since your credit score has a huge effect on your budget, it’s important to understand exactly how it is calculated and how to take care of it. Let’s start by looking at how your FICO credit score calculation actually breaks down.

35% - Payment History
30% - Balance-to-Limit Ratio
15% - Length of Credit History
10% - Types of Credit Used
10% - Recent Applications for New Credit

So, let’s define these terms a little further…

Payment History:
The single largest portion of your credit score calculation comes from a simple question: “Did you pay all your bills on time?”

Someone with an occasional “30-day late” payment will not see their credit score affected too much. But, if you start piling on more 30-day late payments, or any 60-, 90-, or 120-late payments, prepare to watch your score plummet.

Balance-to-Limit Ratio:
The second largest component of your credit score comes from the total amount of available credit that you’ve used. If you have a $2,000 credit limit, but have only used $1,000, your ratio is 50%.

Generally, your credit score is affected negatively as your balance-to-limit ratio climbs, as well as the total dollar amount of your available credit. Also, lenders often use balance-to-limit ratio benchmarks (such as 33% and 50%) to decide if someone is too risky for a new loan.

Length of Credit History:
This category is one of the biggest myths with credit and one of the things I’m constantly trying to get people to avoid. The myth? That you need to “build credit.” In fact, the length of your credit history is only 15% of your overall score.

If you do not have a long enough credit history, a lender is ultimately going to look at your income to see if you can cover the payments. College kids and young couples do not need to worry about building credit. It backfires more often than it helps!

Types of Credit Used:
Certain types of credit are thought to indicate risky spending patterns more than others. For example, someone who is constantly signing up for credit cards at mall retailers appears impulsive.

If they were to have $5,000 in balances on these cards, it would be viewed more negatively than someone with $5,000 in student or auto loans.

Recent Credit Applications:
Lenders are always on guard for red flags; some indication that you might be a credit risk. If someone all of the sudden applies for a dozen different credit cards, it may be a signal that they are in the middle of a financial crisis.

Now that you know the basics of calculating your credit score, check back for part two of this series, which will cover checking and protecting your score.

As most of you have heard by now, the government has decided to send you some money in the hopes that you’ll spend it and help stimulate the economy. Unfortunately, many people are already committing themselves to flat-screen TV’s and vacations in Tahiti based on myths and misinformation about the size of their tax rebates.

To keep you from over-committing yourself and your rebate check, here’s a basic overview of the program:

Who Will Get Rebate Checks?

• 130,000,000 households
• The majority of people who file a 2007 tax return and their dependents
• Many other taxpayers who didn’t have to file a return
• Anyone with at least $3,000 in income (including Social Security and VA benefits)

How Much Will The Rebate Be?

• $300 – 600 per individual, or
• $600 – 1200 per married couple
• $300 maximum for each qualifying child
• There are “phase-outs” for adjusted gross income above $75,000 for single taxpayers ($150,000 for joint).

What is a “Qualifying Child?”

• Under age 17 at the end of 2007
• Lived with you at least half of the year
• Was dependent on you for at least half their support
• Was U.S. citizen, national, or resident alien

How Do I Figure Out Exactly What I’ll Receive?
You can use the IRS Rebate Calculator to estimate your check.

When Will I Get My Payment?
It depends on the last two digits of your Social Security number and whether you use direct deposit or receive a physical check.

Direct Deposit Schedule by Last Two Digits of Social Security Number:
00-20 May 2, 2008
21-75 May 9. 2008
76-99 May 16, 2008

Paper Check Mailing Schedule by Last Two Digits of Social Security Number:
00-09 May 16, 2008
10-18 May 23, 2008
19-25 May 30, 2008
26-38 June 6, 2008
39-51 June 13, 2008
52-63 June 20, 2008
64-75 June 27, 2008
76-87 July 4, 2008
88-99 July 11, 2008

Tax Rebate Scams To Watch Out For:

• Phone calls from an “IRS employee” needing your bank info for any reason.
• Rebate or audit email requesting certain info in order to process your rebate or avoid an audit.
• Email allowing you to download documents about the tax law changes (can contain viruses).

Entrepreneurs are the brave souls who make our economy go, or at least they were when our economy was actually going anywhere. Especially in this currently questionable financial climate, starting your own business is undeniably a dicey proposition. Start-ups go out of business all the time, often before they even have a chance to even really star up at all. The main culprit in the savage slaughter of these young establishments is the same perpetrator behind the bulk of our fiscal difficulties: Debt.

As an emerging entrepreneur, it is very easy to quickly accumulate debts that are substantial enough to kill your burgeoning business before it even gets off the ground. But it does not have to be that way. Take the time to examine your business workflow and you will likely discover a number of extraneous costs that can be eliminated to improve the health of your bottom line.

Here are eight common practices that lead to common results; learn to avoid them and you will be uncommonly successful.
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When asked what the most important factor is when choosing a financial planner, the majority of those who responded listed trust as the overriding characteristic. But how do you judge trustworthiness? Some financial service firms might present their experience and assets under management to convey their commitment to building trust with potential clients. But long histories, and billion-dollar portfolios do not necessarily translate into a trustworthy relationship.
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Many clients who are over age 70½ ask us if they can still make contributions to their Individual Retirement Accounts (IRAs) — and if so, what the maximum amount they can deposit is. The answer depends upon your individual situation.
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Have you watched the prices of real estate climb each year in your community and thought about how it might be a great idea to have a rental or commercial property in your IRA? Although real estate can be a good addition for your portfolio, owning it within an IRA can be packed with problems.
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When markets are down or sluggish, it’s easy to feel that your mutual fund is under-performing. Before assigning a term like “under-performing” to a fund, you should take many factors into account. If your fund is down enough to worry you, it’s a good idea to call your financial advisor with some key questions.
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Educated investors often look at a number of features of mutual funds, such as sales charges, beta, alpha and other technical characteristics. But one factor that is often overlooked is how tax-efficient the fund is.

A tax-efficient investment is one that can be reasonably expected to produce favorable tax consequences. For example, a 401(k) or variable annuity, whose taxes can be deferred, might be considered tax-efficient. A municipal bond fund, whose income is usually exempt from federal and state taxes, might also be considered tax-efficient (although municipal bond funds seek income that is federally tax-free, a portion of the fund’s returns may be subject to federal, state, and local tax and the alternative minimum tax).
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If you’re getting divorced, you have many issues to contend with, not only emotionally and relationally, but logistically and financially as well. Although much of the anguish from divorce is inescapable, some of the financial pain from this process can be alleviated with proper planning and cooperation between former spouses.
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Although there can be many reasons why your taxes this year could be higher than you expect, such as having to report a capital gain or taking a lump-sum retirement plan distribution, one of the major culprits of this problem can be the income you draw from social security. When social security began back in the thirties, it was originally slated as tax-free income. However, over the years Congress has enacted legislation that has eroded this tax-free status. The general parameters for the current taxation of social security are broken down as follows:
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Typically most Roth IRA distributions are tax-free. But there are a few exceptions to this rule, one of which can apply even after you have reached age 59 ½. While these exceptions are not very common, Roth IRA owners should be aware of them and when they apply.
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