Category Archives: Financial Doing

Annual Credit Report: Where to go to get your free credit report

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If you own a television, you have probably seen one of the many versions of commercials touting the free credit reports.  Or as you have browsed the internet, you surely have seen the banner ads with enticing “click here for your free credit report” messages.

The problem is, with so many companies saying that they offer the free reports; I have found that many people don’t know where they are actually supposed to go to get their free reports.  But they do know that if they go to those places that are advertising, they are going to be offered something to buy.

The website to use is www.annualcreditreport.com  or call 1-877-322-8228.

Equifax, TransUnion, Experion

Well, I hate to break it to you, but when you go to the official website, the three credit bureaus are going to try to sell you something too.  They are going to ask you if you want to buy your scores.  Do not buy them.  They are not the FICO scores that banks use so the score is not very helpful.  Getting the reports; now that is tremendously helpful, so definitely do that once a year.

What to look for on your reports

Make sure that there are no duplicate accounts, errors in information reported, or activity that isn’t yours.  For information about identity theft refer to the FTC identity theft website.

Which one to get first

This is my personal preference; I like the summary that Equifax provides at the beginning of the report.  If you have not printed your free credit reports before, I suggest printing the Equifax report first and looking over the summary, it is educational as well as informational.

How often to get your Free Annual Credit Reports

You can pull all three at once and be done with it until next year.  Or spread it out and get one every four months as a way to monitor your information on an ongoing basis.  Just keep in mind that, surprisingly, information can vary from credit bureau to credit bureau so spreading it out does not guarantee that errors will be caught in a timely manner.   But if you consistently pull them, any errors will be caught once a year.

For further information see the Federal Trade Commission website for the Free Annual Credit Report.

Full Social Security Statements Now Available Online

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As of Tuesday you can now get your full Social Security Statement online.  It includes your lifetime earnings history and estimates of disability benefits you could receive should you become disabled.  It also lists benefits your family could receive if something were to happen to you.  It provides much more information that was previously available online.

Last year the government stopped mailing the statements, which saved $70 million dollars.  Statements will be mailed again, but only to individuals who are over 60.

Getting the online Social Security Statement is very easy; I got mine in about six minutes.  Go to   https://www.ssa.gov/myaccount/  and click on the button that says “Sign In or Create an Account.”

You will need to:

* set up an account by creating a log in id and password

* set up a few questions and answers in case you forget your password

* put in your basic information such as name, address, phone number, date of birth

* answer multiple choice questions to verify your identity, (for example; who is the lender on your mortgage, what is the make and model of your car, etc.)

When your statement pops up you can print it or save it as a PDF.

Keep your login id and password in a secure place, you will want to review your Social Security statement on an annual basis to make sure that the earnings information is correct and use the retirement benefit estimate figures when doing your retirement planning.

MOST – Missouri 529 College Savings Plan Offering Matching Grants

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The MOST – Missouri 529 College Savings Plan recently announced that they are offering a dollar-for-dollar match up to $500 per year per account up to a $2,500 lifetime maximum for qualified accounts. This is a privately funded grant, rather than funded by Missouri taxpayers.

Qualifying for the MOST – Missouri 529 College Savings Plan Matching Grant
In order to qualify for the matching grant, you must meet certain criteria. Quoting from the website https://www.missourimost.org/ :

* Applicant must be a parent or legal guardian of the beneficiary.
* Both you and the beneficiary must be Missouri residents.
* You must be the account owner of a MOST 529 account.
* The beneficiary must be 13 or younger (when you are first approved for the matching grant).
* Your household Missouri adjusted gross income must be $74,999 or less.

You must submit an application by June 30th. You will be notified by August 31st if you receive a matching grant. The matching funds will be applied to the account January 31st. You must reapply each year.

For details and to get the application, go to https://www.missourimost.org/.

Saving for college
There is $125,000 available for the matching grant program per year over the next four years for a total of half a million dollars. With the high cost of college constantly in the news, and frequently on the minds of parents, this seems like a no brainer if you are a Missouri resident with a child under 13 and an income under $75,000.

Investing
College can be so expensive; it makes sense to create a nest egg to offset as much of that cost as you can. People are often surprised to learn how much small regular investments can grow to over time. If you save $40 a month (think of it as just $10 a week) for 18 years assuming 6% annual growth you would have $15,611 for college. Length of time invested is such a terrific boost to your investment, the longer you have the better. However – being invested is the most important factor. The key is to get started.

Peter Cottontail Makes A Lousy Financial Advisor!

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Oh, I know he’s beloved by millions. And I can’t wait to bite off those chocolate bunny ears he will bring me on Sunday. But let’s face it; you wouldn’t want to get your financial advice from someone who puts all his eggs in one basket! You have probably heard that old adage, but do you know what it means?

Portfolio Diversification

Have you ever been in rush hour traffic and the lane you are in is practically stopped but the other lanes around you are moving faster. So you decide to switch lanes, but as soon as you change lanes, your new lane slows down and the lane you were in finally speeds up. That’s the problem with only being able to make one choice at a time, you have to pick the right one or you lose. With investments it is even trickier because there are so many different areas in which to invest. Luckily, with investments, you do not have to choose just one. You can diversify, and put a little bit of money in each area so that you are sure to be invested in the best performing area but you do not have all of your money invested in the worst performing area either.

Asset Classes

So what are these areas of investing that we are talking about? A portfolio should be diversified, or spread out, among stocks, bonds, and cash. Whether you should invest in an asset class or how much depends on your particular situation.

Depending on your situation, your stock portion can be divided up among the following asset classes:
* Large Company, United States stocks
* Mid-Sized Company, United States stocks
* Small Sized Company, United States stocks
* Developed International stocks
* Emerging Markets stocks

Depending on your situation, your bond portion can be divided up among the following asset classes:
* Short Term Bonds
* Intermediate Term Bonds
* Long Term Bonds

Portfolio Rebalancing

You have probably seen the investment pie charts, either in your work retirement plan materials or if you have an investment account, in the materials they provided you. Have you ever wondered “Why is it that everyone keeps telling me to use these darn pie charts?” Each different color of the pie chart represents a different asset class and that illustrates the diversification of the portfolio. So once you pick your asset classes and populate them with investments you are done right? Not so fast!

Annual Portfolio Rebalancing: The most important part!

The marketing materials give you the pie charts; they just don’t tell you how to use them. And that is a shame because, when used properly, in a disciplined fashion, they can take a lot of the stress out of market downturns. Here’s how.

Picture your pie chart, let’s say that your pie chart tells you that you should have 35% in Large Company United States stocks and that area of the market has had a terrific year and you have watched that portion grow from 35% to 38% to 40% to 45% in a year’s time! “Wow”, you say, “I have finally found an investment that makes money!” So human nature tells us, “Add more money to it”. But not so fast. Haven’t we all heard that to make money we are supposed to “Sell High and Buy Low”? Well, fortunately for us, the pie chart is going to help us do that. More on that in a minute.

Picture your pie chart again, let’s say that your pie chart tells you that you should have 15% in Small Company United States stocks and the market has not been kind to small companies this year. You watched your Small Company slice of pie shrink from 15% to 12% to 10%. Your first instinct might be to sell this investment because it didn’t do as well as the others. But that is not what you should do, instead, you should “Buy Low”. Without a plan, human nature makes us do the wrong thing at the wrong time.

Now that does not mean you buy a poor quality investment, speaking to the topic of diversification again when you buy a single stock it can go out of business, when you buy an investment that represents an entire asset class, such as an S&P 500 index fund, it is highly unlikely that all 500 companies will disappear at once.

Annual rebalancing is simply the discipline to evaluate the portfolio once a year to look for changes in the quality of any of the investments and then to check to see if your asset allocation (slices of pie) have gotten out of alignment over the year. If they are more than a few percent off, make some changes. Please keep in mind there may be tax consequences, unless you can make the adjustments in retirement accounts.

What Annual Rebalancing will do for you:

1) Help you sell high (the best performing asset classes) so you can take your money off the table.

2) Help you sell high so you can protect yourself if when “the bubble bursts”.  Have you ever noticed that it is often the investments that have gained the most, that end up falling the most when the market corrects?

3) Help you buy low (the underperforming asset classes), when prices are low.

4) Helps you prepare for when the underperformer rebounds.
2008 worst performing asset class was MSCI Emerging Markets -53.18%
2009 best performing asset class was MSCI Emerging Markets +79.02%

5) Removes emotion! Emotion has you selling when you should buy and buying when you should sell. But having a diversified portfolio and using a pie chart with an annual rebalancing plan will get you through every type of market cycle.

FAFSA: Missouri deadline approaching

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What is the FAFSA?
FAFSA is the abbreviation for Free Application for Federal Student Aid. It is the form that you complete when applying for financial aid.  Financial aid is awarded as grants (you do not pay it back) and/or student and parent loans (you do pay it back, with the exception of loan forgiveness programs.)

Should you fill out the FAFSA?
Yes. When working with higher income households, people often indicate that they do not intend to complete the FAFSA. I encourage them to fill out the form, so that they may keep their options open. If their student applies to a private school, they may qualify for aid directly from the school. Private schools often have their own pool of funds to draw from when awarding aid to students, and create their own processes for awarding aid. However, completing the FAFSA is usually part of the process as well as the school’s own financial aid form. Public schools sometimes have awards to give as well, and part of the procedure at some of these schools is having a completed FAFSA form, so keep yourself in the game and fill out the form by the deadline in order to keep your options open.

What is the Missouri FAFSA deadline?
The FAFSA deadline for the 2012-2013 school year for Missouri is April 2, 2012. However, each school can have their own deadlines for priority award consideration. As an example, Mizzou’s FAFSA priority deadline was March 1, 2012 in order to apply for money that the University of Missouri had to give. If you missed that deadline you still have time (until April 2, 2012) to apply for money from state and federal programs. Being aware of each school’s individual FAFSA deadlines is a good opportunity for your student to practice their research and organizational skills. The best strategy is to complete the FAFSA as soon as possible after the first of the year. Watch the mail for W-2s and other tax forms that you will need.

Where can you go to get FAFSA questions answered?
The US Department of Education’s website www.fafsa.ed.gov is a great place to go to find out deadline information and get questions answered about the FAFSA form.